Long Beach, N.Y., Approves Tentative Deal to Stave Off Bankruptcy
(Bloomberg) -- The Long Beach, New York city council approved a tentative settlement on Tuesday evening with a real estate developer who was awarded a judgment this year now estimated to be worth nearly $150 million, that threatened the city with insolvency.
Long Beach, a city of about 34,000 on a barrier island off Long Island’s south shore, agreed to pay developer Sinclair Haberman $75 million in cash and permit him to build two 13-story buildings with a rooftop penthouse on a long-vacant lot along the boardwalk. The parties have 90 days to finalize their settlement, which also needs ratification from the city’s zoning board.
Long Beach and Haberman have been warring since the 1980s, after the city first granted a variance to zoning rules to Haberman’s father to build beachside developments, then changed its zoning laws and denied permits to a large part of the project.
A judge ruled in Haberman’s favor earlier this year, and in May a judgment of $140.83 million was entered against the city and its zoning board of appeals. With interest accruing at about $1.1 million per month, Long Beach estimated the judgment in the Haberman litigation now to be around $148.9 million.
To pay for the settlement, according to M3 Partners, Long Beach’s financial adviser, the city intends to issue general obligation bonds that will likely cost $5 million to $6 million annually to service.
“While nobody may be happy about this, this is in the interests of taxpayers of this city to get us out from under this 30-year black cloud,” City Council President John Bendo said at a Tuesday meeting to approve the tentative settlement.
After the judgment, Moody’s Investors Service lowered the city’s credit rating to Baa3, one level above junk, and the city hired restructuring advisers M3 Partners and O’Melveny & Myers LLP.
The court judgment, which was more than Long Beach’s roughly $85 million in annual revenue, capped years of financial problems at the city, including overpaying some city employees for unused sick days and vacation time, and paying for that with long-term debt.
Long Beach adopted budgets that resulted in operating deficits totaling $8.5 million in the four fiscal years ended June 30, 2018, the Comptroller’s Division of Local Government and School Accountability wrote in a 2019 report. In response, the city drained its reserves and borrowed. At least three of the five council members didn’t know the city had five straight years of operating deficits, according to the report.
©2021 Bloomberg L.P.