Long Beach remains at top of state's fiscal stress list

Comptroller: Municipalities designated "significant" more than doubled

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Six months after State Comptroller Tom DiNapoli’s office put the city’s level of fiscal stress in the “significant” category — the highest level under DiNapoli’s Fiscal Stress Monitoring System — Long Beach remained at the top of a list of municipalities across the state that were recently placed in the same category, including Nassau County.

In March, the city’s level of fiscal stress changed from “moderate” to “significant,” with DiNapoli’s office citing short-term borrowing, a deteriorating fund balance and increased operating deficits for fiscal 2017.

That month, DiNapoli’s office announced that it had evaluated 529 villages and 17 cities throughout the state with fiscal years ending in June, and found that 10 villages and two cities had some level of fiscal stress in 2017. The state said that Long Beach’s stress level had increased from 58.3 percent in 2016 to 80.8 in 2017.

Last month, DiNapoli said his office designated 25 municipalities across the state as fiscally stressed. This year’s list, he said in a news release, includes 10 counties, six cities and nine towns, marking the third-straight decline in the overall number of municipalities listed in stress. The number of local governments considered to be in “significant fiscal stress” more than doubled over the prior year.

The state said that the monitoring system — launched in 2013 to serve as an early warning to local governments to help head off fiscal problems that could lead to tax increases and service cuts — uses financial indicators, including year-end fund balances, short-term borrowing and patterns of operating deficits, and creates an overall fiscal stress score for a municipality: “significant” or “moderate” fiscal stress, “susceptible to fiscal stress” or “no designation.”

The latest round of scores was based on 2017 financial information and includes only municipalities with fiscal years ending Dec. 31, 2017. Nassau, Monroe, Suffolk and Westchester counties, as well as the cities of Niagara Falls, Poughkeepsie and Watervliet, and the towns of German Flatts, Oyster Bay and Parish, received the highest designation of “significant fiscal stress.”

“Fewer local governments are considered fiscally stressed, but those with persistent financial problems are struggling to stay out of the red and fix their problems,” DiNapoli said in a statement. “While the results may be encouraging in some areas, there are municipalities that should focus on near-term financial risks and implement more prudent long-term planning.”

The state said that Nassau’s level of fiscal stress increased from 56.3 percent to 68.8 percent over the previous fiscal year.

Earlier this year, DiNapoli’s office classified 38 municipalities and school districts classified in some level of fiscal stress. Long Beach, which is currently being audited by the state, remained at the top of the list last month — followed by Island Park — though city officials said that recent efforts to turn the city’s finances around were not reflected in the state’s latest announcement.

Residents expressed shock over Long Beach’s fiscal stress designation in March, with many saying that former City Manager Jack Schnirman had touted a turnaround of the city’s finances over the past several years during his campaign for county comptroller last year.

A month later, officials said that the rejection of a $2.1 million bond measure to cover separation payouts to Schnirman and other employees, including a number of those still on the payroll, created a hole in the budget through the end of the fiscal year ending June 30 and threatened layoffs and service cuts, shedding further light on the city's financial problems.

Moody’s Investors Service, meanwhile, revised the city’s credit outlook from stable to negative, citing “years of operating deficits and the City Council’s failure to approve budgeted borrowing to pay for operating expenses.”

The council voted unanimously in May to approve a $95 million spending plan that avoided layoffs, drastic cuts to services and lowered a proposed 12.3 percent tax increase to 8.3 percent after officials made a number of cuts.

“The primary thing that was done was, we passed a budget that had an 8.3 percent tax increase which really helped the city balance its books,” said Acting City Manager and Police Commissioner Mike Tangney. “That’s not going not be reflected until we end this [fiscal] year.”

Tangney said that the city has already approved, or is looking into, a number of measures to boost revenue, ranging from a mortage-in-default registry, which the council approved last month, to the potential installation of parking meters in the business district.

The state’s designation comes at a time when Long Beach is still searching for a new city manager and a comptroller. Tangney — who is not receiving an additional salary as acting city manager — said that other management positions have not been filled, or have been replaced with employees assuming more than one role at lower salaries, which has saved the city money.

Tangney said that officials are looking forward to recommendations made in the comptroller’s audit, as well as those made by the state’s Financial Restructuring Board for Local Governments, part of a comprehensive review the city’s finances that could net the city $5 million in grants and loans. “We also have our own independent auditors,” Tangney said. “We didn’t get into fiscal stress overnight — that was over a couple of years since the finances deteriorated. Now we’re back on track because we raised taxes the proper amount. I’m very confident that we will see improvements next year.”