The Long Beach City Council voted unanimously at a special meeting Thursday night to borrow $4.2 million from Capital One Bank to keep itself afloat through the end of its fiscal year, June 30, 2020.
The city, faced with a mounting deficit, fears that it would not receive revenues from beach and parking fees, which typically come in the spring and summer months. But the coronavirus may keep the beaches closed. The decision whether to open them, city officials have said, is up to Gov. Andrew Cuomo.
The city council voted to borrow the money at an interest rate of 2.25 percent. That will cost the city $96,000 in interest at the end of its next fiscal year, but the payment can be extended for another year after that.
The council voted after a presentation by representatives of its financial advisors, Capital Markets. The advisors said Long Beach faces a deficit of several million dollars because it may not receive funds from recreation fees, state aid, and sales taxes, all of which have plummeted since the coronavirus took hold in early March.
If Long Beach relied on revenue alone to pull itself out of the hole, it would have to raise property taxes to about 11 percent. The city has already raised property taxes 8 percent in each of the last two fiscal years.
In May, a budget proposed by new city manager Donna Gayden raises taxes 1.81 percent, or about $142 per average household a year. The city council is to hold two public hearings on the proposed budget, in early and middle May.
The Capital Markets representatives said the co-called "deficiency note" to Capital One Bank "is a short-term note to help make the city whole." They said the city has no financial resources to see itself through to the end of its fiscal year. The representatives advised against setting up any type of state control board to oversee Long Beach's finances. Such boards, they argued, tend to remain in place long term and board members receive high fees for their services. Nassau County has been under the jurisdiction of a control board for nearly 10 years now, they noted.
The financial representatives said it was not unusual in the current economic climate for municipalities to seek funding against a possible loss of revenues. They also noted that the city has already taken steps to reduce spending, including closing the ice rink and much of the recreation department. A total of 142 part-time, non-essential employees have already been laid off.
The city, under Gayden, is developing a five-year plan to strengthen its finances.
City Council president John Bendo said that the city normally receives significant revenue from beach fees and parking fees. "But because of Covid, we don't know if we will receive these fees to carry us to the end of the (fiscal) year."
"We have to keep the lights on and pay the employees," he said.
Councilmember Michael Delury said a lot of revenue comes in from beach passes and that may not materialize. "This is not a unique situation," he said before casting his yes vote.
City Council Vice-President Karen McInnis said she had reviewed all of the documents and declared them "sound" and that the borrowing was necessary.
"We don't have any cash for any rainy day fund," McInnis said.