LONG BEACH — The City of Long Beach is moving forward with a plan that could allow it to borrow up to $50 million from Wells Fargo to pay for city projects and equipment.
But the proposal raises an important question: Is the city taking on more debt at a time when its finances are already under pressure?
The plan is called a “revolving credit facility lease financing.” In simple terms, it works somewhat like a giant credit line. The city could borrow money when needed, up to $50 million, and would pay the money back with interest and fees.
What makes the deal especially important is what the city is putting behind the financing.
Long Beach would lease three public properties to the Finance Authority of Long Beach: the Lincoln Parking Garage, the Broadway Parking Garage beneath the Long Beach Public Library, and the Silverado Park swimming pool facility.
The properties would then be leased back to the city.
Under the agreement, the city would make payments from its General Fund, the same fund that helps pay for police, fire, parks, libraries and other city services.
The resolution says the financing will provide a public benefit, but it does not, by itself, explain exactly how all $50 million will be spent, how much taxpayers will ultimately pay in interest and fees, or what would happen if the city cannot make its payments.
That deserves closer examination.
Long Beach officials have already warned about future budget challenges. Adding another financial obligation could put additional pressure on future city budgets.
Questions City Officials Should Answer
Before approving the financing, taxpayers should be told:
- What specific projects will the $50 million pay for?
- How much interest will the city pay Wells Fargo?
- How much will fees and other financing costs add to the bill?
- Why does the city need to borrow the money now?
- Could these projects be delayed or paid for without borrowing?
- What happens to the three public properties if the city fails to make payments?
- Could taxpayers eventually face cuts to police, fire, parks or other services to repay the debt?
- Have other banks or financing options been considered?
- Will the City Council receive a complete list showing where every dollar is spent?
Borrowing money is not necessarily irresponsible. Cities regularly borrow to pay for major infrastructure and equipment.
But with up to $50 million on the line and public property being used as part of the financing structure, residents deserve to understand exactly what they are getting and what they are risking.
The key question isn’t simply whether Long Beach can borrow $50 million.