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 2021-22 fiscal year are reasonable, and whether the City took appropriate action to implement or resolve recommendations from our budget review issued in May 2020.
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 City's financial condition remains in significant fiscal stress.
- The proposed general fund budget of $93.6 million is structurally imbalanced because the City continues to issue debt to finance recurring operating expenditures.
- The continued reliance on proceeds of long-term debt to finance recurring operating expenditures will further diminish the City's ability to finance needed services in future budgets.
- The City's proposed budget includes a tax levy of $50.5 million, which is $3 million above the legal limit, unless the City Council overrides the tax levy limit.
- The proposed budget includes a 4 percent water rate increase. However, at the time of our review, the City Council had not authorized the rate increase.
- Based on the City's historical overtime cost trends, the City's overtime appropriation appears insufficient.
- City officials did not include cash flow projections in the proposed budget. Although not required, cash flow projections would provide officials with another gauge of the effectiveness of the proposed budget.
- City officials developed a "Budget Timeline," but City officials never confirmed an actual budget adoption date.
Key Recommendations
- Discontinue reliance on proceeds of long-term debt to finance recurring operating expenditures.
- Be mindful of the legal requirement to maintain the tax levy increase within the legal tax levy limit, or properly override the tax levy limit prior to adopting the budget.
- Authorize the proposed water rate increase prior to adopting the budget.
- Consider increasing the appropriations for overtime or ensure that controls are in place to reduce the use of overtime.
- Include cash flow projections in the budget, to identify and address cash shortfalls.
- Review our recommendations before the budget is adopted.