Wed 11/17/2021 08:31 AM
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The City Council of Long Beach, N.Y., moved during a regular meeting on Tuesday evening, Nov. 16, to extend the contract of City Manager Donna Gayden amid ongoing efforts to shore up the finances of one of New York’s most fiscally distressed municipalities.

The City Council did not hold a planned vote on a resolution authorizing the issuance of budget notes to pay debt restructuring advisors O’Melveny & Myers and M3 Partners ahead of an anticipated reimbursement from the state.

In approving the $203,000 contract through 2023, City Council members lauded Gayden for a willingness to make tough decisions as Long Beach works to fix its finances, noting that although progress has been made, the job remains unfinished.

The city of Long Beach is developing a multiyear financial plan amid efforts toward a restructuring against the backdrop of nearly $500 million in long-term liabilities that include legacy bond debt, pensions and other post-employment benefits, or OPEB. The city’s long-term liabilities also include a $130 million civil judgment in the Haberman litigation, a marathon zoning dispute dating back three decades that is the subject of settlement talks.

Extending Gayden’s contract appears to tick a government continuity box cited by Moody’s in July when it downgraded Long Beach’s issuer rating and general obligation limited tax, or GOLT, rating to Baa3 from Baa2 with a negative outlook. Moody’s said the lowered rating “reflects a weak governance structure that has seen consistent turnover, discussion about restructuring debt and/or long-term liabilities and a lack of possible willingness to make the necessary revenue enhancements or expense reductions to bring the budget into balance.”

In September, Long Beach extended the retentions of both O’Melveny & Myers and M3 Partners to provide legal and financial advice, respectively, related to a potential restructuring of the city’s financial obligations.

Eliminated from the City Council meeting on Tuesday night was a resolution authorizing the issuance of up to $2.4 million to finance consulting expenditures not covered in the current fiscal 2022 budget. The resolution states that Long Beach owes M3 Partners $1.4 million and O’Melveny $1 million in compensation to date, adding that the city expects to be reimbursed for all or part of such compensation via a grant or grants to be received from the State of New York Financial Restructuring Board for Local Governments.

Asked during the meeting whether the advisory firms are continuing to incur fees, Gayden answered in the affirmative and pointed specifically to the Haberman judgment. “We’re still negotiating the Haberman case, and they are assisting with that,” she said.
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