Purpose of Budget Review
The purpose of our budget review was to determine whether the significant revenue and expenditure projections in the City’s proposed budget for the 2019-20 fiscal year are reasonable, and whether the City took appropriate action to implement or resolve recommendations from our budget review issued in May 2018.
Background
The City of Long Beach, located in Nassau County, has been authorized to issue debt not to exceed $12,000,000 to liquidate the accumulated deficit in the City’s general fund and certain other funds as of June 30, 2012. Local Finance Law requires all municipalities that have been authorized to issue obligations to fund operating deficits to submit their proposed budgets for the next fiscal year to the State Comptroller for review while the deficit obligations are outstanding.
Key Findings
- The proposed budget includes appropriations of $85.7 million and revenue estimates of $40.7 million. For the fiscal year ended June 30, 2018, personal services and employee benefits accounted for 90 percent of revenue. This leaves little to finance operations and maintain infrastructure; yet the City continues to incur debt to finance recurring costs.
- The proposed budget includes revenue estimates of $4.5 million in metered water sales and $5.5 million in sewer rents. However, the City Council has not yet authorized the budgeted increases in rates that are needed to realize these revenues.
- The proposed budget includes appropriations of $1.9 million in termination salary payments, yet expenditures have averaged $2.2 million over the last three years.
- City officials only partially implemented the Comptroller’s recommendations in our May 2018 review of the 2018-19 proposed budget.
- They did not modify the proposed budget to reflect a budgeted increase in refuse and garbage rates until June 2018.
- The City Council authorized $2.2 million in debt to cover termination salary related expenditures, planned to be issued prior to the end of the 2018-19 fiscal year. Continued reliance on debt to finance operations perpetuates the City’s weak financial condition.
- The City’s initially proposed budget includes a tax levy of $45,092,654 which is $3,218,797 above the limit established by law. On May 7, 2019, the Council adopted a resolution authorizing the City to override the tax levy limit.
Key Recommendations
- Authorize the proposed increases in water rates and sewer rents prior to adopting the budget, and implement these increases in a timely manner.
- Modify the budget to increase appropriations for termination salary payments to be more consistent with past payments.
- Include cash flow projections in the budget, to identify and address cash shortfalls.
- Review our recommendations before the budget is adopted.