The Long Beach City Council held a virtual public hearing Tuesday night on one of the thorniest subjects to plague the municipality in years: separation payments for retiring employees.
The city once again plans to borrow money — this time, $2.7 million — to make the payments to about 40 people seeking to retire. Long Beach will issue a bond to cover the cost. As recently as May, the city issued a bond for $4.7 million for another batch of separation payments. Wall Street bond-rating agencies have lowered the city’s ratings to several notches above junk as a result of its messy finances, a situation that has worsened in recent years.
A vote on the latest bond authorization is scheduled for Sept. 15.
Tuesday’s hearing lasted well over an hour, with several participants complaining about the city’s continued borrow and increased debt. One questioner identified herself as “Marie Brutus,” but council President John Bendo said she was actually a he, with “a made-up name.” Deepening the mystery, Bendo made it clear that she or he was a former city official, saying that “Marie Brutus’s administration” bore much of the responsibility for getting the city into financial trouble. Bendo did not elaborate on who the questioner might be.
Council members said that under the direction of Donna Gayden, who be-came interim city manager in February and is an expert in municipal finances, Long Beach has put together a five-year plan to make the city financially stable. Gayden, Comptroller Inna Reznik and council members said they could not promise — as “Marie Brutus” asked — an end to the borrowing, but, they said, the city is working on updatingits computer systems to ensure that separation payments are accurate.
Council members also expressed frustration with the way the city’s finances, including severance payments, have been handled. Council Vice President Karen McInnis told Reznik, “Every year we run through the same fire drill that we don’t have enough money” on hand.
Reznick said that should not happen. But, she noted, “Revenue streams have been volatile, [and] sales taxes and beach fees both took hits” amid the coronavirus pandemic, and future state funding is uncertain. Reznick reiterated what other officials had said, that the city has devised a plan to straighten out its finances in the years ahead.
Some of the newer council members had said in the past that they opposed any more borrowing. But when Gayden took on the city manager’s job, she said that borrowing would continue to be necessary until Long Beach’s finances could be stabilized.
“What we are doing with this bond, these are obligations that were made before” she arrived, Gayden said, adding that time management and other computerized systems are certain to help.
Roy Lester, a bankruptcy attorney and a former president of the Long Beach Board of Education, said that the city was still using antiquated systems. “And we’re once again borrowing,” he said. “I don’t see any effort to stop this. I’d like to see something done that doesn’t look like we’re going through a Groundhog Day movie.”
Gayden responded, “We are working on a plan. We are watching the budget as closely as possible.”
The very mention of separation payments sets off alarms among many city residents, because the payments turned into one of the largest scandals in the city’s recent history, leading to investigations by state and federal law enforcement agencies. This spring, Long Beach filed suit in Nassau County Supreme Court against former City Managers Jack Schnirman and Rob Agostisi, seeking to claw back $2.4 million in what officials claim are illegal payouts to city employees. The suit accuses Schnirman, who is now the Nassau County comptroller, and Agostisi of breach of duty of loyalty, fraud, conspiracy to commit fraud, and constructive fraud violating state law, and seeks an accounting of all payouts made from 2012 to 2018.
The suit alleges a history of retirement incentives and overpayments of accrued vacation, personal and sick time to city employees, as well as an agreement to pay Schnirman and Agostisi their accrued time in full, which officials say violated city code.
Attorneys for the city argue that Schnirman violated the “faithless servant doctrine” and took advantage of the city’s loyalty and trust. The lawyers also said that he and Agostisi would no longer be protected by the city’s liability laws if their actions result in a misdemeanor or higher crimes.
The Nassau County district attorney’s office and a U.S. attorney’s federal grand jury have been investigating the city’s payouts for two years, but no charges have been filed.
Schnirman deferred comment to his spokesman, Brett Spielberg. “Jack is not going to be distracted by frivolous lawsuits and political vendettas that waste taxpayer dollars,” Spielberg said. “We are focused on the work Nassau residents elected us to do.”