Long Beach, the Long Island shore town still reeling almost six months after Hurricane Sandy, is poised to be the first New York city in three years to get permission to sell debt to fill a spending gap.
New York’s second-wealthiest city by median income is asking state lawmakers to approve as much as $12 million in bonds, which would be the biggest deficit financing authorized since 2007 for a city in the third-most-populous state.
Sandy struck the Northeast Oct. 29, flooding Long Beach and destroying its signature boardwalk. As the municipality of 34,000 residents about 30 miles (48 kilometers) east of Manhattan awaits $200 million in federal disaster aid, investors are still drawn to its bonds, which are rated one step above junk. Amid the longest rally since 2010 in high-yield munis, buyers have pushed yields on some obligations to record lows.
“Yields are so low there’s been more and more interest in high-yield paper,” said Howard Cure, New York-based director of muni research at Evercore Wealth Management LLC, which oversees about $4.5 billion. “It has federal aid on the way and Long Island gets a lot of support from the state.”
Long Beach is part of Senate Co-Majority Leader Dean Skelos’s district. Last year, the Republican blocked a request from the city for deficit financing, which requires lawmakers’ approval, saying if the state could balance its budget without extra borrowing then Long Beach could, too. At the time, the city was six months removed from a five-step downgrade by Moody’s Investors Service. Now, because of the storm damage, Skelos will back the debt plan, said Scott Reif, a spokesman.
Sandy, the largest Atlantic storm in history, caused about $60 billion in damages in New Jersey, New York and Connecticut. It killed more than 100 people in the U.S. and triggered the worst flooding in the more than 100-year history of the New York City subway system. Long Beach was among the hardest hit when the ocean met the bay to its north. The damage to the boardwalk and beach, its biggest draw, has cut revenue projections by $1.1 million just as city officials were restructuring finances.
In February 2012, Long Beach declared a fiscal crisis after an audit revealed city officials had underestimated spending and revenue for several years, creating a more than $10 million budget gap. City Manager Jack Schnirman, hired the previous month to fill the fiscal gap, said the crisis, which allowed him to reappropriate a $60 million budget, is over.
“The city is certainly in both fiscal and physical recovery,” Schnirman said. “Investors want to invest in a positive story.”