Long Beach approves $5.65 million bond measure

The City Council voted 4-1 on Sept. 4 to issue up to $5.65 million in bonds to cover the cost of 55 employees’ retirement and separation payments over the next five years. The council meeting grew contentious at times as officials debated Long Beach’s recent borrowing initiatives amid its financial woes.

City Manager Jack Schnirman said that the bonds will be issued in order to pay for costs associated with employees who were laid off or have agreed to an early-retirement incentive since December.

Termination payments cost the city $3.7 million, while early retirement incentives total $1.75 million, and recent layoffs, $200,000. Issuance of the bonds will be necessary to balance the budget, Schnirman said, but will ultimately save the city $1.5 million per year and create much-needed cash flow. Comptroller Jeff Nogid said that the city’s annual interest rate on the bonds would be about 3 percent, or $150,000 to $200,000.

“First we had a bunch of police retirements, then additional retirements, then the early-retirement incentive,” Schnirman said. “This is a fundamentally different kind of borrowing than we’ve looked at over the course of this year.”

He added that the city has reduced salaries by about $1.9 million since January, and that the plan will help shrink the city’s debt burden while spreading the payments over five years.

“What we’re doing is taking some of the old debt off the books, paying that off and ultimately … by [next] spring, the only debt that will be outstanding … is this borrowing, which will then be cash-flow-positive,” Schnirman said.

The measure comes nearly four months after state lawmakers killed a measure that would have allowed the city to issue up to $15 million in serial bonds to pay down its $10.25 million deficit over 10 years. On May 24, two days after the City Council adopted an $87.9 million budget for 2012-13, council members voted to submit a home rule request to the State Legislature seeking approval to issue the bonds.