Moody’s: surcharge is a ‘credit positive’ for Long Beach
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However, Moody’s said that the city will likely have to issue short-term notes to meet its cash flow obligations over the three-year period. The city has approved several borrowing measures in the past six months — including $6 million in March and $5 million in June — in order to help close the deficit, pay essential operating expenses and payroll. Schnirman said that those measures do not impact the city’s general-obligation debt.
“Throughout the year, financially, there are ebbs and flows, and there are times when you have cash on hand or [don’t], depending on when you get your property tax bills,” he said, adding that it has yet to be determined whether the city will have to do any additional borrowing. “When you have a municipality such as Long Beach that doesn’t have a rainy day fund any longer, you don’t have reserves that you can draw on on a short-term basis during the lean months. If you did the deficit borrowing, you would have that cash on hand and that’s what you would use. At the end of the day, it doesn’t change your finances; it’s how you manage your cash flow.”
City Councilman John McLaughlin, the lone Republican, said he was concerned about potential borrowing measures. “This tax increase was to cover the deficit, so if we have a balanced budget, as they claim, why would we have to borrow?” McLaughlin said. “I also think that Moody’s’ record of predictions … are less than pristine, as we’re not the only municipality that they’ve flubbed on.”
Former Councilman Denis Kelly criticized the city for borrowing and taxing instead of finding other ways to significantly cut costs, such as consolidating services with Nassau County or the Town of Hempstead. “As far as Moody’s is concerned,” Kelly said, “as long as you’re paying your bills and balancing your books, they don’t care if you tax your community into oblivion.”
Last year, Moody’s downgraded the city’s rating from A1 to Baa3 following a cash-flow shortfall in November that led the previous administration to borrow $4.5 million to make its payroll and to meet its payout obligations for a number of retirees.