okay good evening folks and welcome to a
special
city council meeting and uh
why don't we uh we'll get the show on
the road
good evening and welcome to a special
meeting of the council of the city of
long beach held tuesday april 13
2021 at 7 pm we'll have a roll call
council member delorey president
councilmember mandel
president councilmember treston
president
vice president mcginnis president
president bandar
present let the record indicate the
presence of city manager donna gaiden
and deputy corporation council richard
barrios we'll have a salute to the flag
and i'm going to ask
deputy corporation council rich berrios
to lead us
all right hands over hearts i pledge
allegiance
to the flag of the united states of
america and to the republic for which it
stands
one nation under god indivisible with
liberty
and justice for all
okay so um
i guess before we get started tonight i
just want to acknowledge we have some
um some dignitaries that are going to be
joining us in in the meeting tonight
um we have mike iannelli from
senator chuck schumer's office we have
um kathleen rice our our
congresswoman from the house of
representatives
we have new york state deputy
comptroller eliot auerbach
we have new york state senator todd
kaminsky
new york state assembly woman missy
miller
we have gabriella castillo from
nassau county executive laura curran's
office and we have nassau county
legislator denise ford is joining us as
well
so that's quite a a vip lineup and
i'm sure that you may be wondering why
all those
uh important people here so um
so i guess i should start by saying um
tonight uh tonight's
going to mark the start of some
incredible incredible body of work some
important
um stuff that we're going to be uh
undertaking here in long beach if this
is approved
um and before we really get to the to
the meat and potatoes of it i guess
i'm going to give you a you know a
little bit of about a minutes worth of
background
uh here of how we got to where we are
so just under 14 months ago we
introduced
donna donna gayden to the community as
our new city manager
and as we were speaking to donna during
the uh the recruitment process
we made it uh clear to her that a
primary responsibility
uh that she would have while while she's
here would be to analyze
and address the city's dire financial
situation
and quite frankly that's what she's done
she's been
uh fierce tireless and quite frankly
uncompromising
about addressing the city's financial
challenges
and uh anybody who works with donna
knows she tells it like it is and pulls
no punches
and take it from somebody who talks to
her probably six times a day
but to be quite honest uh after years of
things happening
in smoke-filled back rooms that's
exactly what the residents of long beach
uh want they they want
demonstrable facts and clear action
going forward
so tonight don is going to walk us
through the particulars
of this uh major endeavor we uh
will be voting on uh and it's basically
to approve
contracts with outside firms
that are going to objectively guide our
financial recovery
so if this is approved the road ahead is
going to be
long it's going to be challenging
but the simple fact is simply
acknowledging the reality of our
situation and the challenges we're
facing and getting down to the business
of
addressing them is is a critical first
step
that uh that needs to be undertaken so
uh with that i'm gonna turn it over to
donna
um thank you president mendo um the
first thing
i'm glad you brought up why you brought
me here
one of the things that i have received
from the council and we've talked about
it on
several occasions at that this council
no longer wants to kick the can down the
road
um a lot of decisions have been made in
years past
and i'm not saying that those decisions
weren't the proper decisions at that
particular time
however no one probably ever thought
about what the outcome would be
several years down the road and so now
we're down the road and we're
approximately 500 million dollars
in debt in long-term liabilities um
what the if people i have been saying
this all day
if you look at the 2019 audit it showed
that
in long term or actually in liabilities
and liabilities for everyone to know are
obligations that have to be paid it was
311 million dollars
ina resnick our comptroller and i have
been looking at all of this
and then we received the haberman case
so when you
add up the 131 million dollars to it
we're close plus some other things that
have come up we're
close to being a half a half a billion
500 million dollars
and we only have a budget of 83 83
million or 84 million
dollars so that's like you have maxed
out all your credit cards
to the limit and your credit card debt
is higher than the money that you bring
in
um that analogy i want people to
remember that because that analogy will
be used throughout the night
um in doing so we i knew
um that we would balance the budget
uh we would be moving forward however we
needed to get control of the long-term
debt
and in doing so um we the council and i
have agreement
on two firms one m3 and oh melvinia
myers
m3 is a financial company or melvania
myers
are a law firm i'm going to ask each one
of the firms to introduce themselves
and to give a quick overview of what
we're looking at doing
but the goal is that long beach will
survive
there are rumors out there that what
we're trying to do is restructuring so
long beach
will not survive we will be absorbed
that is not
the intention of myself nor is it the
intention
of this council what we're doing is
we're stop kicking the can down the road
identify what we have to pay and figure
out how we're going to pay it
um so on that note i would like to
introduce
m3 uh mo
you're all here okay um uh
good evening uh ladies and gentlemen um
and thank you for
allowing me thank you donna for allowing
me a few minutes to speak
uh m3 partners is a financial and
restructuring advisory firm based in new
york city
uh we work with uh companies and
organizations
uh including municipal organizations
to work through challenges such as the
ones you're facing
um i'm the managing partner of the firm
senior professionals of my firm have
worked on
various restructurings from a financing
standpoint including
the city of detroit various projects in
puerto rico
and the u.s virgin islands
i'm going to lead this engagement
and personally i also sit on the board
of
nifa which is the nassau interim finance
authority
donna yes
so um maria would you like to introduce
yourself
jordana hi this is maria dakonza from
o'melvini and myers
o'melviny is a law firm with offices
internationally
and here in new york city i'm a partner
in the restructuring group at o'melviny
in the new york office i'm also
a lifetime long island resident
we in the restructuring group at
o'melviny have experience
in many municipal settings and in
corporate restructuring
where we advise clients on how to move
forward
and look at their liabilities and their
assets and determine the best
way to ensure that they
um are paying their debts as the
as they come due and they have long-term
viability and sustainability
um we are currently working for the
government of puerto rico
we represent the puerto rico electric
utility and water and sewer authority in
their restructuring
and i worked with the city of hartford a
few years ago
in their restructuring um we're very
proud
of melvini as a group our restructuring
group is creative
we're innovative we're consensus
builders
and we're very much looking forward to
working with long beach
my partner john rapiscardi is on as well
so he could introduce himself as well
hi um thank you maria
i'm john reporsardi i am the chair of
the restructuring group uh
at melbourne um i don't think there's
much said as to
what maria just said about what we've
done um
in terms of representing clients in
restructuring matters including
the governor of puerto rico where i've
been lead counsel for the last five
years
and i've been in the practice for 40
years representing a whole variety of
companies in distress and also
governmental entities
i've been involved representing the
government of california
in the pg e chapter 11 case
and i represented president obama's auto
task force in the restructuring of
general rosen chrysler
as maria said we have a very well
experienced team in terms of
uh dealing with issues that the city
is facing now and i would say that
we are you know very familiar
with crisis situations and situations
that need to be dealt
with creatively and trying to
minimize uh the time necessary to
achieve a restructuring in the most
efficient
way possible thank you
i'm thank you with someone going to say
something
sure donna i was just going to um say
that as you as you mentioned
um it's maria again we're we here we
at o'malvinia and m3 we're here to build
on the work
that donna the city manager and the
controller has done to get the city's
finances in order
um we bring to the table an independent
outlook based on decades of experience
in helping troubled municipalities
and companies in these types of
situations and really
looking at and exploring options for
this city
in situations like this those options
include many things there's no
one path there's not even one right path
we're going to look at what paths are
available to the city and what the best
way to proceed is
and that could be a refinancing or
reprofiling of debts
negotiating consensual modifications
things to maximize revenues including
maximizing any counting of state or
federal aid
or other resources that those entities
might have for the city
and how to really use the revenues and
the resources that the city has
available to the
to the benefit of the people of long
beach
we um are looking at all situations and
as i said there's no one right path
um if necessary we could resort to an in
court option
um but that's something that is a tool
in the process
not a goal or um
by means only one path forward
um we're not here with any kinds of
preconceived notions
um we want to look at the situation
objectively and try to design a holistic
solution for the city
thank you um one of the things uh
senator uh senator kaminsky has to get
off
and so i had because he has been helping
um helping myself every step of the way
and talking to the comptroller's office
i want to ask him to go ahead and speak
because i know he has to hang up
john are you able to are you able to see
and hear me we can
hear you can't see all right i got all
dressed up for nothing
uh just want to let the viewers and the
residents of long beach know
that the state has an important role to
play here
ensuring that long beach has the funds
to make these
hires so that they can have the experts
guiding them along
this journey to figure out how to handle
this this massive debt
so what i've been doing is speaking with
the state financial restructuring board
which is an entity under the governor's
division of budget
some of you may remember that a few
years ago they authorized um
the city um to get grants of up to five
million dollars
to help it with its continuing um
mission of becoming more transparent and
financially solvent and unstable fiscal
footing
um i think that uh spending some of that
money
on retaining these top level experts is
certainly a worthy goal
um you know these shouldn't be one-shot
expenditures but should help long beach
get on that firm footing and that's what
these firms have expertise in doing
um first handling the debt figuring out
how to do that and then and then helping
long beach figure out a financial plan
uh as we move forward and so it is my
hope
that this spring the state financial
restructuring board will have a meeting
it has not met yet since the copen
pandemic
but we do expect it to have a meeting
this spring and we hope that one of the
items
that it will authorize is uh the state
uh to be able to help long beach retain
these experts by providing the funds to
do so
i have very positive conversations with
individuals who work
at the board um about that but of course
it is
that board's decision to make they will
have to have a public meeting
in which to do that and that is what we
hope to be the result
of course any other way to get state
funds to help long beach deal with some
of these issues is important
but we are dealing on a massive level so
whether you know we're able to do a
million dollars here for a water
restructuring project or to help build
the park
these are all important we're going to
continue to work on that but this is of
such a
of a really gargantuan level
uh that that real professionals who
who've dealt with
these crises situations could be brought
in to help advise the city
so uh the city retaining these services
and confronting this head-on
is important and uh it is my role to
help try to provide the funds
one of my roles anyway to help the city
retain these experts and i will continue
to advocate
as diligently as i can for that and uh
whatever the city
needs to help get through this crisis i
hope to be a representative that could
help the city along and help our
residents
come out with a stronger more vibrant
community
because this is not only a community i
represent but also one in which i live
and
raising uh my children so i'm
appreciate uh you allowing me to say
that and having me here tonight
um thank you very much senator one of
the things that i do want to stress to
everybody that's listening
there's a difference between the budget
and
our long-term liabilities the budget
when we look at this
we are not looking to do to affect the
budget in a sense where we're doing
service cuts or we're doing layoffs
we're looking at the long-term
liabilities that the city has
um shortly they will the the team will
show
a slide to show you what are long-term
liabilities
so again where people are saying the
city is going to have a massive layoff
no that's not what we're talking about
the city is going to start cutting
services
that's not what we're talking about we
are talking about
any type of long-term liability
um president bindo did you want to say
something
before we continue uh i think well
now might be a good opportunity if uh
any of our uh uh people from the other
government
uh entities that have joined us uh if
they
have any remarks they'd like to say from
the state or a
federal government or the county
i think melissa miller has a hand up
missy miller yes
okay yes sorry i can yep can you hear me
yes we can okay great um obviously i i
would like to hear more of
you know this presentation and um
exactly i have the
um preliminary information but i'm i'm
certainly interested
in hearing uh what's to be said
and obviously you know my role
uh as senator kaminsky said from the
state
will be to do what we can to support
this
uh you know the the the hard-working
residents and taxpayers here
are you know innocent and we want to
protect
their interests we want to do what we
can to make this
work um and uh of course i will do what
i can to help that
and maybe i'll have more to say after
i've heard the whole presentation
okay great um and one more thing i do
thank the this board and certainly donna
for the mindset of not wanting to kick
the cam forward
i do appreciate that
yeah congresswoman rice just got unmuted
too
hi can you hear me yes we can
great well thank you so much for
including um
you know todd and myself and other
elected officials
i'm interested in getting as much
information as possible because i want
to be
as helpful as possible um we worked
really really hard in the american
rescue plan to make sure that there was
state and local aid
in that bill that can be used for
coveted expenses and lost revenue the
money that you that the city of long
beach
is scheduled to get it's just a drop in
the bucket compared to the
half a billion dollars in liabilities
that the city has
um but i i'm looking forward to hearing
from the two
um consultants about
uh what the plan is that they're looking
to put together and to see if there's
any way
that me and my role a member of congress
can
can help the city of long beach i'm i
was so glad to hear
our great city manager say that the plan
was not to
just kind of fall under the auspices of
you know the larger town of hempstead
um and have the city of long beach go
away it's critical that we figure out a
way out of this hole
and whatever i can do to be helpful i'm
more than happy um
to do whatever i can and again thank you
for your
invitation and i will mute myself now
and and listen to all these you smart
people come up with
ways to get out of this hole thank you
all right thank you so much
congresswoman
uh denise did you want to say something
um
i will hold my remarks till after the
presentation
uh because i am interested in uh
what's possible solutions or what advice
they may be able to offer us and
you know i commend all of you for facing
this head on and uh donna thank you very
much for the hard work that you put into
this
it's hasn't been easy for you since
you've been on board and
especially our new council members too
so it's
the pandemic and now this so i am
interested to see
um how we move forward with this and
then i will probably comment
afterwards but thank you john thank you
for doing this okay
um all right so it sounds like uh
people are sort of waiting for more
information so why don't we
um
uh if we can put up the summary of
liability slide
donna or dave that would be great okay
give dave just one moment he's going to
put it up
um thank you so so just in in relation
to some of the comments
that the dignitaries just made i want to
be clear
on one thing which is we're not we're
not here today
to present a plan uh for how to deal
with all of this
that will come later well after we we
begin our work and complete our
diligence and come up with the different
options
uh with with uh pros and cons around
which which paths take what i what i did
want to frame
for uh the meeting uh and the attendees
today
is the total level of liabilities
long-term liabilities
facing the city uh there's bond
indebtedness that's accumulated to 128
million dollars
the haberman litigation judgment was 131
million dollars
uh that could subject to approval of an
offset
uh resolution today could be reduced to
uh by about 20 and a half million
dollars
uh which is certainly a good step uh
but in in the big scheme of things uh a
drop of the bucket
uh so that's 131 million dollars
and then you have other post employment
uh uh
benefit related liabilities of about 140
million dollars
in addition to that there are various
other liabilities
compensated absences pension liabilities
separation pay
etc uh that are 29.5 million
for compensated absences and about 36
million dollars of various other
liabilities
now here as maria indicated before
uh it's very very critical to note that
the exercise we are undertaking
uh is is specifically designed
not to impact the ongoing operating
services
of the town that is a clear mandate
from both the city council and the city
manager
and comptroller and that's a key issue
we are focused on the long-term
liabilities
and and there i won't repeat what uh
maria mentioned about the various
tactics we're gonna
use but we're carefully and methodically
gonna go through this process look at
options around
each of these obligations that the city
has
be extremely careful uh
to ensure that it does not attack impact
the day-to-day operations of the city
and
i think questions were raised or
comments were made earlier
about the city of long beach getting uh
absorbed by somebody else that is simply
not on the cards
so we want to be very very clear about
that
and ensure that this is a project
designed to
use a series of paths
from renegotiation refinancing
consensus building all of the all of the
above and some combination of
help and aid from various other parties
and we've heard
uh the the key stakeholders in terms of
representatives
from different levels of government uh
express
their willingness to help uh which we've
already observed so
donna let me stop there uh uh and and
pass it on to you or to old melvin
um we can pass it on to maria or john
from old melbourne
go ahead john oh what i was just going
to say was that
uh the emphasis here um in terms of this
process
is trying to achieve consensus
and um as maria maria can go over the
various uh
options that were evaluating um
you know trying to achieve a consensual
uh
agreement among all of the uh you know
different
buckets of liabilities we're looking at
is certainly desirable
and most efficient uh it doesn't rule
out an in court proceeding at the end of
the day but as we said that that's
a um a tool of last resort
uh we're looking to bring consensus to
the process
and uh hopefully um the parties uh that
um hold each of these debt obligations
uh uh will be cooperative and work with
us
in being creative and coming up with
solutions to
um help the city adjust this debt
which as donna alluded to is just simply
too much
in terms of its sheer volume and size it
needs to be adjusted in in some sort of
fashion
that makes it affordable for the city uh
to carry
uh over the long term
maria yeah and i would i would just
point out
that although many of these
liabilities are things that have to be
paid and are able to be paid over time
the magnitude of them impacts
the annual budget and without a holistic
solution
to address the long-term liabilities the
city ends up in a situation where it has
a more difficult time addressing the
short-term liabilities
and so it's very important and it is the
correct step
for the city to be taking now to look at
these long-term liabilities and to come
up with a plan to address them
i also want to make note that if the
audit for 2019
is on the website if anybody would like
to look
this is what we have as long-term
liabilities
as of today if you look at the one item
compensation
time pba that 800 000 wasn't on there
last year but that is
not that 800 000 did not happen in one
year
so as we're doing this exercise there is
a possibility that this amount may
increase as we're going through to find
out if there are any other long time
long term liabilities that we were not
aware of at the time so i encourage
uh anyone watching to go back and look
at the audits because the audits will
tell you
the liabilities have always been in the
audits
the long-term liabilities um when the
new audit comes out
in a few weeks you will that ends for
jan uh june 30th i'm sorry june 30 of
2020
you will see the long-term liabilities
or the entire liability section
in there so um it is i
i want everybody to realize that
even though it may go down tonight by 20
it may go up later because we have
identified
something else that may not have been
identified
in prior years but it is a prior year
liability
okay um mo did you want to add anything
else to this
no i i want to make sure that everybody
understands exactly what we're doing
so that people will not walk away saying
they're going to merge they're going to
cut services which we said we have not
they're going to
lay off people which we have not we have
not said we are
we're not that's not the intentions
we're not looking at day to day
this is our long-term obligations
donna i will just add uh in in
conclusion
uh simply that number one the city of
long beach is not going anywhere and uh
we fully expect it to
thrive and continue to thrive as a
result of this process
number two i think we're building on the
progress that the city manager
and the city comptroller have made
in terms of progress on the annual
operating
uh that they've that they've sort of got
close to if not balanced over the past
uh 18 months or so
uh three this is an exercise that's
focused on ensuring um
as as was mentioned earlier uh
that all of its long-term liabilities
are are dealt with responsibly uh
and contractually uh and consensually in
terms of with the counterparties
um and it puts the city in a position
where
it can continue to invest in its
operating
projects and provide a a
an excellent lifestyle before for the
city
uh but to do so in a financially
responsible manner
uh so we we fully expect to expect to be
transparent as we work through this
process
and report in due course uh when we're
ready
i just want to add to what mo just said
that
um in addressing the these long-term
liabilities it is sending a signal to
the capital markets
that the city has a plan
bringing on professional advisors to
address how to
deal with these liabilities going
forward doing nothing
is not the signal that you want to send
to the capital markets
and by addressing them and coming up
with a plan of action
as i said sends that signal to capital
markets which will
allow the city to have access
to investment dollars coming in
that will allow the city to grow and
become prosperous
for a citizenry
yeah and john john just to finish that
thought it's
like i said we're going to continue all
the uh consider all of the options
as maria indicated um bankruptcy is not
what we are focused on today i just want
to be very clear
it is it is an option of absolute last
resort
we're not foreclosing any any tools that
the city may have
at its disposal um but just to be clear
uh any headlines around bankruptcy or
any sort of uh dark news
uh is definitely well premature and
probably wrong
so i think we should be very very clear
about that
uh that this is about dealing with the
long-term liabilities in a responsible
manner which allows the city to continue
its services
okay and then the last thing that i have
to add is that in 2019 the city was
number one is the most fiscally stressed
city in the state with a marking of
85 unfortunately we are still number one
but we are doing better we dropped down
from 85 to 77 so that shows that we are
working hard to move in the right
direction so that we could get off that
list and that is not something that we
are striving to be number one
in and this will definitely help us um
at that
at this time john i will turn it over to
you
um for questions from any of the
legislators
all right and just uh i think one thing
that's important to
uh two things probably important to
point out that that drop in our fiscal
stress score from 85 to 77
you were only here for four months of
that time
so you got this you got us down seven
point you got us down ten percent in
four months your first four months here
so
that that that says something uh the
other thing
i think it's worth pointing out is until
a few days ago
our debt was actually 600 million
dollars
but because we were able to settle the
istar
lawsuit at no cost to the taxpayers
that that reduced a hundred million
dollars of our
of our potential debt there so um
uh two uh two things i think are
worth noting thank you john but i work
with a team of people
so i'll take your comment back to the
team okay
so um with that i guess i'll uh
i'll offer again any of our uh
dignitaries if they have any additional
uh comments they'd like to make now that
they've uh
seen a little bit more of the
information again uh this
is not the solution this is the work to
come up with the solutions
so but with that um
if anybody wants to say anything before
we move on
denise assembly wouldn't sorry then
followed by assemblywoman miller
okay okay missy could go before me she's
senior to me
all right she's from the state missy you
go that's fine
you're you're no offense but you're way
more senior to me and when it comes to
politics and long beach
um i my question is basically
you know this sounds great this
financial restructuring
is there any um idea any hint
as to how you know donna had mentioned
that they're not
um laying people off that they're not
reducing services
so exactly how does one go about
restructuring with this enormous debt
without
um affecting give the functioning of the
city
uh is it a matter of raising taxes or is
it
how how does that play out if that's a
fair question
maria well the the first thing is to
have
a realistic assessment of what the
liabilities are
when and how they can be paid and what
the options are
for restructuring when and how they can
be paid
um it's often a situation where you can
come to a consensual solution
to modify payments um
to do something that makes sense with
the city's ongoing budget
there could be refinancing um
reprofiling
um and really just looking at what the
revenues of the city are
the pockets of revenues making sure that
the city is taking steps it needs to to
ensure that the revenues are used
appropriately
and really just making sure that all
constituencies are involved
in in the analysis and the solution
um there could be solutions involving
business leaders in the city there could
be solutions
involving the bondholders so there are a
host of
tools available and we're really just
getting started in our work
we appreciate the support that we're
seeing from
from um you know the political side here
because it is really important there are
solutions that involve
um the state and local governments which
we would look into
and and really present our goal is to
present options to the city
and to show the city the pros and cons
of the different options
and and allow them to make a decision on
how to proceed
so if there's a big um
to try to do this through uh increasing
revenues
uh and and you know through business and
and other um you know
avenues throughout the city um to
increase
revenues through that way not through
just the taxpayers
the goal is is that that's that's right
is not to
to make this all about the taxpayers
that's correct
thank you and to answer that i mean the
focus is going to be on debt
modification debt adjustment and
how do you achieve that in a consensual
way
and um so it's not a question of if but
how
uh because it is a very large number and
it needs to be addressed and it needs to
be
uh somehow adjusted or modified and
that's where we're going to be going to
work
to figure out creative ways where we can
convince
the various constituents holding these
pieces of debt
to engage with us and come to an
agreement as to
a modification or adjustment of that
debt which allows the
you know the city to
carry the debt going forward in a
sustainable affordable way
okay denise did you want to uh say
anything
okay sorry just a few missy covered a
lot of
stuff that was um within my notes but
how long
do you do maria how long do you
anticipate
that this would take is there a time
limit or is it open-ended
we're hoping to move quickly um and to
have some analysis
for the for the city in the short term
okay so um and then obviously then you
do look back at past practices that the
city had uh
participated in you know to look to see
how we got here or
do you just take it from here and then
move forward
well it's a little bit of both it's
important to know how we got here
to avoid getting here again so
the analysis will involve more of the go
forward but we do need to understand
what the inputs were
that um ended up in in this situation
okay and um you know like
senator kaminsky had mentioned and i
remember like a couple of years ago with
the payouts that uh we gave
you know that i guess started a lot for
us a lot of this but
um that the state had offered five
million dollars to the city of long
beach to do what
audits to take a look at um you know
their financials
um i'm wondering if when he said about
that this may be able to help pay some
of the fees for this is that something
that
am i reading this correctly or did i
misunderstand what he said
um this is donna you read it correctly
um
i have been working with the state since
i've been here
we send them the budgets i talked to the
financial
restructuring board uh i think it's tim
ryan
at least once a month um and so we're
looking to see how
how they can maximize how they can help
us
okay all right so you know so hopefully
then this is something that the state
can
help help us moving forward especially
dealing with these firms
obviously they have a great reputation
and um
you know so you know i'm looking forward
to see
to seeing what they do uh come up with
what type of solutions
so and then um my lesson i guess so then
they would also look at um
when we look at the debt and whatever
they can restructure
you know to hopefully maybe look to see
um
from other sources i mean i know that uh
congresswoman rice had said
you know the federal government can give
some money but i'm hoping that maybe
they can also help
help us look maybe they could find other
places
where we can secure funding under
different um you know
different titles of funding sources so
uh in order to help alleviate some of
this debt so
but um good luck with everything this is
uh it's a big moment for the city
and um you know i'm looking forward to
uh hearing what they have to say and i
hope
i hope for the best for everybody okay
but thank you
yes we will look we will look at all
potential other sources
of funding financing uh that can help
alleviate the
the solution the problems here right and
and motion you know that
uh like even with where we with the
county we have uh the knifer
board and and they've been helpful in
helping to restructure and
doing some creative things also with the
county so um
you know hopefully maybe there's
something that you might be able to
take a look at and say well we never
thought of this and let's
maybe this is something that we can use
to help the city so
all right thank you exactly thank you
all right anything else donna um no
that's it okay um
and and i guess i'm kind of i'd probably
stating the obvious here but you know we
we're entering
uh silly season here in long beach or
sillier than usual we have an election
coming up which means
you will see every kind of weird
distortion
humanly possible about this on social
media
you know uh rethink getting your news
from social media just ask
just ask us you know as you see here
we're trying to lay out everything
all the details about this um
so everybody has a clear picture of of
what's going on
so uh just uh be a little skeptical
about what you're probably gonna read on
on social media uh so with that i guess
i'll give one last call if anyone else
uh any of our
dignitaries had any comments
okay seeing none dave why don't we since
we just went through
all the background information for items
two and three on the agenda why don't we
move
those up so let's let's reorder the
agenda and do
item two first then three and then one
yep absolutely okay onto the regular
calendar we're gonna start with item
number two resolution authorizing the
retention of m3 partners lp
okay well i think we just heard
everything we're gonna hear donna is
there anything to add
um the only thing i would say is that on
the website we have
a section called transparency
all contracts will be posted and within
the next couple of days
the contract that you all will approve
tonight will be posted in the
transparency
portal on the on the website
okay all right so with that
are there any questions from the council
members
all right seeing none dave i'm gonna
assume we got questions from the public
yes first is kevin heller okay
hold on one second
yep go ahead oh sorry that took a few
minutes um i guess the first question i
i have i'm just curious why we brought
this to a special city council meeting
we just had a city council meeting a
week ago there's another regular one
coming up
could it not have been at a regularly
scheduled meeting
anyone uh
i mean my understanding is special
meetings uh mr heller
the main reason why i was brought to a
special meeting is because the depth
of the information when you take things
to
council meetings it should be something
that's um
council meetings actually should not be
more than an hour
hour and a half this needed to be
have pay as much attention to it as
possible
and special meetings can be called when
we
at any time everything doesn't have to
go to a council meeting and so we
we chose um that we wanted to have this
on the agenda
so that people can answer questions
people can
hear exactly what was going on um
and as of such okay okay fair enough i
just would ask
in the future to give a little bit more
notice i just happened to stumble across
this meeting
a couple of days ago on uh your facebook
announcement which okay i had to reach
you know kind of rejiggle my schedule to
be able to be here
so friday the meeting was closed
most of friday just as we post all of
our other meetings
so to moving on m3 partners specializes
in financial restructuring
including bankruptcy so you know
i would suggest that obviously one of
the options on the table if you're going
to try to negotiate with counterparties
has to be that
do do we even qualify for bankruptcy
under municipal law
um maria would you like to answer that
maria or john yes we do all right we do
i mean there's no question there
okay question i guess for the council
what is the cost of hiring him
of retaining m3 i mean i heard mr
kaminsky say that
uh the frb might pick up the
tab but he also said they are going to
vote on it on the spring so it's
possible they won't
assuming they don't what would the cost
be to long age
this is donna mr heller the total cost
is 1.5 million dollars
and the um senator schumer's office also
said that they would assist us in
getting this paid
they did not want us to prolong this and
so we
are really looking i i can't say
100 that this will be paid through
one of the uh one of the offices if not
through both
okay um i'm just curiou i i
i looked at the um financials from 2019
on the transparency portal and i was
focused on the condensed statement of
net position
and there it said the net position was
uh a negative 214 million with
outstanding long-term debt obligations
of 83 million
um so i'm getting confused i'm sorry
i'm sorry you said the long-term um the
the total net position is a 214
000 negative 214 million yeah yeah so
what did you say about the 80 the the
long-term debt obligations
at that time were 83 million which i
guess is irrelevant tonight you showed
it was 100.
you're saying 2019 2019.
okay if you turn to page 21 in the audit
total non-current liabilities is uh 271
million
i'm not sure where you're getting that
debt obligations and long-term
perspective uh
the outstanding debt and outstanding
long-term perspective obligations are
two different things right
no long-term liabilities are your total
liabilities that you have to pay
long-term
so that was 271. what you have to look
at is that
your total current liabilities is 62
million
and that 62 million typically look
current liabilities means that they have
to be paid
within a one-year period now you look at
that 62 million and a budget of 83
million
what is your budget actually going
toward and so
of that you got 271 million
uh in non-current liabilities and those
are
paid out over time and the largest
liability
at that time was 131 million in open
which is other other post post
employment benefits
right right so okay
just the last question i have on this
particular resolution is um
you've presented the um
prospective financial obligations of
about 460 million
but over that time period that you
calculate those obligations what is the
expected revenue
well the revenue comes in as the budget
and
and if you like mr heller you can come
in and meet with inna and i we can go
over it
the revenue that comes in comes in based
on the budget so for example
if we say that our budget expenditures
is 83 million dollars
then that means that when we balance the
budget the revenue is 83 million dollars
so our liabilities those long term
that become current have to be paid out
of that 83 million dollars
that's where the problem comes in
but i understand that but if you say
when you do an analysis of where you are
your financial position right you say a
460 million in prospective financial
obligations over some time period i
don't
you didn't present what that time period
was but each one has a different time
period
so if you had let me find it it will
tell you in the notes
each one what the total time period is
that each one has to be paid back
yes but can you say if if you told me we
have 460 million in prospective
financial obligations over x time period
but we have 460 million dollars in
prospective revenue i would suggest we
don't have a financial problem
so what is the financial where do you
get the revenue what is the revenue
protections over that period
so i guess where i'm confused mr heller
is that where do you get we got 464
million
first of all like you presented that
tonight
no that's not what we didn't talk about
464 million dollars in revenue
no no financial obligations that's money
that you have to pay
i'm asking you what the revenue is that
would offset that but the revenues
the revenues go to pay for the budget
and to fund the budget
the question is not what the revenues
are over the period
that these liabilities have to be paid
the question is
what are the available revenues after
paying for the city's services during
that period of time
right and so that is part of the
analysis that's being done in connection
with this process
just to add just to add to that the 83
million dollars
is the annual gross revenue for the city
uh and there is that is what i said too
but it was 83 million dollars
right so in in it you know that
goes to pay for all the services and
obligations
uh that that the city provides
uh and then there's some portion left
over for debt service
uh uh including both principal and
interest
uh and when you layer in just uh mr
heller
uh a judgment of the magnitude of 111 to
130 million dollars on top of that which
is an immediate issue
uh that obviously to give you some
perspective
even leaving aside some of these other
issues which which were significant
um in in 2019 so i think
i think the point of this exercise is to
really go back
and say when you add in the 83 million
dollars of revenues
uh deduct uh you know what the
ongoing uh operating expenses are for
the city
let's say there's somewhere between five
to ten five to ten to fifteen million
dollars
i'm i'm not providing a number
i'm just giving you an order of
magnitude just so you're clear
so it's not that the entire 83 million
dollars
is available to services liabilities
it's only a fraction of that
um and and the the exercise we are
undertaking
will lay that out in a thoughtful clear
objective and diligent way uh
at some point it will we will come back
and present that to the council
uh and lay out what that is that's
exactly
your question is a very good one that's
the question we're
actually embarking on a project to
answer
right and then what i would suggest um
team is that when we um uh
present we need to present
so that non-financial people can
understand the finances
mr heller's question was a good question
but
thinking it from financial terms we have
to make sure that the non-financial
people
realize that when you see the long-term
debt
that doesn't mean that if we're bringing
in revenue every year
that that's going to pay that debt down
all due respect i have an mba in finance
okay and what you've presented to me is
one side of the equation that's all i'm
trying to get at you've presented the
obligations but
you know for example i'm seeing real
estate
real estate prices are at all-time highs
here in long beach that has to
imply that your tax base is going to go
up is that
enough your time is up
thank you okay thanks you'll have an
opportunity again on the next one i'm
sure you'll be back
so uh all right dave i see roy just
popped up so he must be next
all right go ahead on mute all right
thanks
um donna i have to applaud you because
uh having
had so many clients in this type of
situation it's a tough decision to make
a very tough and i'm sure you've spent a
lot of sleepless nights over this
and it's probably the only alternative
we have right now
um i understand what you're saying we
basically have about 13 million
in debt service right now our judgment
alone is running a million a month
that's 12 million there's no way you can
pay your 480 million dollars
without extra money so you know i
i understand kevin's question but i i
also
can see what you're saying you just
don't have the money to pay off the debt
but i do have one question cma
uh we're paying 10 000 a month isn't
that
duplicative of what we're hiring these
people to do
is there a way we can save that money no
cma is actually working with us
um with the so they are part of the
group they just did speak tonight
we're doing the five-year plan um they
help us
to cut back on some of the expenses they
are picking up some of the work
okay so that's saving us money with the
attorneys
yes okay all right
thanks
okay uh who's next dave uh john ashmead
okay hey um
actually at this point i sort of forgot
my exact question but
you know i guess my thoughts are this is
that
you know there have been
misrepresentations about the true
financial condition of the city
for as long as i've been paying
attention which started with kevin
heller 10 or 12 years ago
maybe 13 years ago and each
administration
has promised to tackle the tough issues
and then at best done some work on the
margins while not tackling anything
serious
instead um what they've done
as kevin knows is every year borrowed
more money
to pay off the shortfall in the budget
so i think it becomes pretty abundantly
clear that we do not have the revenue
base now or everyone's taxes would have
to go up dramatically
to make any debt and then we were hit
with this haberman judgment
uh you know which is from an action
going back three decades and legal
errors made 10 years ago
that basically is a gut punch to this
city which was already rated the state's
um
most financially stressed city um
you know to my mind leaving the city
administration in a position
where it can no longer pass the buck not
that it has but prior administrations
have and and maybe that's sort of a
silver lining
um that there's no way to avoid fixing
our financial mess
uh at this point and i don't think
there's any way to slip a surcharge onto
our tax bills which was done with the
last
20 million dollar judgment a few years
back related to an old super block
related lawsuit um i think that the
judgment amount
uh on top of our existing fiscal
condition
uh puts us in a catastrophic position
i'm not in the bond markets i'm a
restructuring attorney but i
have serious doubts that we could even
bond that judgment and if we could i
don't know how we pay for it i think my
taxes went up for the
20 million judgment surcharge like three
or four hundred dollars a year
uh if you had to bond another 120 i just
don't know how that works for most
people that live here
and value of homes itself while it may
increase the tax base
doesn't mean that people necessarily
have the money to pay it um
you know you guys came in on the heels
of the separation payout scandal
including the efforts by various city
officials to cover that up
um you faced that you faced covid the i
star lawsuit that was dumped in your lap
and now you have this
i think you've done a great job working
through the financial maze
and shenanigans in opacity uh uh
of the financial picture you've stopped
as i understand it
the overpayments above contract rates
since you guys
have taken over whatever it was 15
months ago which is
three minutes mr ashby uh and so i just
wish you
a god speed with this and i think you
should move as quickly as you can to try
to figure things out straighten out the
city
all right thank you john all right dave
uh who's next
uh kathleen o'leary okay hello kathleen
um okay i have a couple of points um
first thing is um with the 1.5 retainer
agreement i guess that's what it is
we're not
being given any a time limit
on how long that lasts and also we're
not there
are no commitments that the state or the
federal government
are are going to pay part of this fee so
that makes me a little nervous um
and in terms of looking through and
analyzing it it's been suggested before
with the separation payments probably
going back 30 years
you know the city knows who they gave
them to
and they know how much they gave and
you know a simple clawback of all or
some of that money
would be beneficial to the city um
so i i would i would point the m3
partners in that direction
i think that's a that's an easy thing
from the outside
just to start contacting people and
saying hey you know would you like to
give us some of that
overpayment back and then the last thing
i want to speak about
um there are very simple ways for the
city to increase
revenue um and they've not been
moved on okay we've suggested um
parking meters there's been a bunch of
suggestions that haven't been taken i
think
simultaneously as we're working to
refinance or restructure
our debt we should give a little more
attention about things that could
bring more money into the city thank you
okay thank you kathleen
uh all right dave do we have uh someone
anyone else
nope that was all that was all okay so
why don't we move on to
item number three which is now going to
be item number two
item three is a resolution authorizing
the retention of outside counsel
okay so it's basically the same
information as before so i'm to assume
donna has nothing to add
is that okay uh do we have any questions
from the council members
okay and uh from the public dave
yes kevin heller okay
uh yeah it's kind of a repeat question
but what is the cost
to long beach to retain all melvini and
myers
gotta
the total cost for both companies is 1.5
oh okay so
i wasn't clear on that i wasn't going no
i'm sorry you know what i did make it
clear earlier when i said 1.5 and we
were talking about
m3 it's for both okay
um my understanding of uh
of a potential chapter 9 filing and and
i did
imply before that that has to be one of
the options if you're moving down this
road
requires um sort of a good faith
filing and a big part of the um
prospective financial obligations that
you spoke of is the sinclair haberman
lawsuit um i don't think you can feign a
bankruptcy filing attempt in
in an attempt to force a party to
litigation so i'm just
curious where the sinclair haberman
lawsuit is are we attempting to
negotiate
that out of court is it is it a foregone
conclusion that that figure you put up
on the slide is
is what we will owe
well i think we're we we really want to
comment about
uh strategy in terms of uh negotiating
um or the requirements of chapter nine
uh i don't think your
your statement of the law is correct but
i don't think this is the time to really
be addressing that
uh at the approp when and if we ever get
to that point we will
review all the filing requirements that
are necessary but we're just not there
yet
okay when i look at the statements that
you've made you know we don't want to
lay off people we don't want to impact
workers but it seems that the
debt obligations is a small part of
what's outstanding
i'm just i'm having trouble visualizing
how you're going to
facilitate the restructuring without
sort of
impacting services it seems like it
would have to be part of the equation
well we're going to be as we said over
the next uh
or the short period of time in the
ensuing weeks we're going to be looking
at the debt obligations you got to start
somewhere
and um we're going to be studying those
obligations researching it and coming up
with strategies
to modify uh those debt obligations in a
consensual way
and let me work from there um we can't
you know in terms of coming to
conclusions at this time i i just
i don't think it's it we're at that
point
i guess the last question i have then is
it is it going to be part of your
analysis and
process to attempt to renegotiate
collective
collective bargaining agreements with
unionized employees
we just as maria said before
we're taking a holistic approach we're
looking at all
obligations and modifications and
adjustments
and you know i i don't want to pick on
any one particular
uh set of subset of obligations
um we're just starting the process so at
the appropriate time we'll
review everything uh when we're ready to
go public with our recommendations
okay that was my last question on this
resolution thank you
okay great anyone else dave
yes uh kathleen o'leary welcome back
hi there um i just have a question about
uh what is the hourly rate if this
company
uh law firm has to go to court in
behind behalf of the city
we we have a capital limitation on our
fees
um so the the hourly rate really is um
is not relevant um uh there is a
uh uh time limit on our retention
which is what i believe it's three
months
oh three months yep okay so there's no
separate charge if you're
have to litigate no okay thank you
okay uh anyone else dave that was it
that was it okay let's move on to the
next item
okay going back to the beginning of the
calendar item one is resolution
authorizing the settlement
of the offset issues in the habermann
litigation
all right i'm going to assume that's mr
barrios
that would be correct good evening
everyone um i'll be
brief but to the point as everyone knows
because we've discussed it a bunch
during this special meeting there is a
judgment against the city
in the haberman litigation what this
resolution purports to do is is that the
attorneys have gotten together
we had a separate inquest scheduled
from the original haberman judgment
right so if you recall the haberman
judgment
declared the city was liable for 131
million in change but also ordered a
separate inquest be held
to determine um what offset the city was
entitled to
in the zander litigation the xander
litigation was a related litigation that
settled before
trial so back in november when we had
our inquest
xander was scheduled to also move
forward simultaneously but they settled
before they went to trial
for 25 million so the judge in this case
basically said
you're going to have a hearing to
determine how much of the 25 million
you're entitled to because
i don't know how much that is at this
point so attorneys got together and have
agreed upon
20.5 million dollars as an offset
without setting
foot in the courtroom
needless to say with uh i guess with the
interest running on the judgment itself
um and the cost of actually conducting
the hearing with uh
you know with attorneys left right and
center uh
it's our recommendation that the council
passed this resolution authorizing us to
settle the offset issue for 20.5 million
okay are there any questions from the
council members
all right seeing none dave do we have
any from the public
yes roy lester okay
rich uh just one question how does that
affect the interest that's already
accrued
well what it does is it just basically
chops off 20.5 off the final judgment
you know regardless of whatever that
final judgment is
naturally you know litigation moves
forward right the notice of
judgment and entry has to come in and
the legal procedures have to follow from
there so
what i'm trying to figure out is the
interest that has accrued
so the our judgment will now become a
111
million dollar judgment and the interest
that was running will only be on that i
imagine that would be a point of
contention later on
but uh you know the city's position
right now is it's 20.5 off the top
no i know but you know we've run a
million dollars of interest a month
and so the 131 is right now a lot more
than that
it's like about 140 or something so i'm
wondering is the 20
taking off the 140 or is it taking off
the 131
whatever final whatever the final
judgment is going to be roy is with the
20.5 offsets
okay so we don't know all right thanks
okay okay anyone else dave
yes kevin heller okay good mr heller
uh when was this offset agreement
reached
i guess that's almost what do you mean
by when was it reached
i'm sorry was it a week ago was it
yesterday this was a matter of
days okay
that's all i have thank you okay
dave anyone else nope that was it
okay so let's move on to the voting
okay on to the voting portion so item
one is a resolution authorizing the
settlement of an
of the offset issues in the haberman
litigation which just moved the adoption
of this item
i will second i will
voting council member delorey yes
councilmember mandel
yes councilmember truston yes vice
president mcginnis
yes president bendo yes item two is a
resolution authorizing the retention of
m3 partners lp
don't you just remove the adoption of
this item i will
second
hi well voting councilmember delury
yes councilmember mandel yes
councilmember treston
yes vice president mcginnis yes
president bendo
yes and finally item three is a
resolution authorizing the retention of
outside counsel
we'll introduce a move the adoption of
this item i will
second i will voting council member
delury
yes councilmember mandel yes
councilmember tristan
yes vice president mcginnis yes
president pendo
yes we'll make a motion to close the
meeting
i will second
hi well voting councilman delorey
yes councilmember mandel yes
councilmember treston yes vice president
mcginnis
yes president benda yes all right folks
uh since this is a special
meeting there's no good in welfare
tonight so uh thank you for joining us
and uh we will see you at the next
meeting
everyone have a good night oh and by the
way just a reminder this saturday behind
city hall
is the stop program uh what that
is is for those of you that maybe
participated this past weekend in the
paper shredding and the e-recycling
that was so you could get rid of your
papers that have been accumulated
what this is to get rid of basically
your chemical waste if you have old
paint or
chemicals uh sitting around in your
house
um okay mr mcnally is gonna add sorry
just
saturday is the bike auction sunday oh
sorry stop program behind city hall
sorry sunday it's nice to have things
going on again in the city
yeah saturday is the bike auction and uh
where we'll be uh uh auctioning off
bicycles that
uh have come into the police
department's possession they were
abandoned or things like that
um so uh if you need a bicycle good good
opportunity to pick one up for cheap
um it's fun
so with that thanks for joining us and
we will
see you next time