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Dec. 20 (Bloomberg) -- The Long Island seashore town of Long Beach had the credit rating on its general-obligation bonds lowered five steps by Moody’s Investors Service after the city borrowed $4.25 million -- in part to cover a $500,000 payout to its retiring police commissioner.
Moody’s cut the New York municipality’s rating on $48.3 million of bonds to Baa3, the lowest investment grade, from A1, according to a report released today. It also placed the city on review for possible further downgrades.
Earlier this month, Long Beach, a city of almost 36,000 residents about 30 miles (48 kilometers) from Manhattan, sold $1.75 million in tax-anticipation notes that mature in August, and $2.5 million in notes that mature on Dec. 13, 2012, according to data compiled by Bloomberg. Long Beach needed the cash to meet its December payroll, City Manager Charles Theofan said today in a telephone interview.
“We had a top police official retire with a terminal leave payout of $500,000,” Theofan said. “We also spent a considerable amount of cash on cleaning up the damage from Hurricane Irene.”
Police Commissioner Tom Sofield, a lieutenant who spent more than 30 years with the department, was owed the money under union contract terms, Theofan said. The city is waiting for a $1.5 million reimbursement from the federal government to cover the costs of the August hurricane, he said.
Termination payouts include accrued vacation time and unused sick days, according to the Long Beach Herald newspaper. Two other outgoing police department employees cost the city $900,000 in payouts, the Herald reported Nov. 23.
Sofield has retired from the police department and couldn’t be reached there, Carolyn Eaton, his former secretary, said in a telephone interview. His home telephone number is unlisted.
Long Beach’s finances have been “deteriorating” since 2008 as mortgage-tax revenue declined and expenditures increased, Moody’s analysts wrote.
“Projections show the city’s cash-flow balance is expected to decline further and may require additional cash-flow borrowing in the near term,” the analysts wrote.
Theofan said the city expects from $16 million to $17 million on Jan. 1 from real estate tax payments that will refill its coffers.
“This is not something that is isolated just to us,” he said. “Municipalities across the country have been downgraded along with the United States.”
--Editors: Mark Schoifet, Pete Young
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