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Hatzenbuhler’s ad-hoc: rehashing known problems while offering no real solutions

At one point, during Saturday’s “ad-hoc” finance committee meeting, David Dybas stretched out his hands as wide as he could to illustrate just how big and insurmountable he thinks the city’s financial problems are. At another point, an audience member asked what the “next step” was. Dybas’ solution? Hire more consultants to figure out the “mess.” At what cost to the city? Dybas didn’t really know, but threw out a figure of $1 million.

It was the first time Fourth Ward Alderwoman Diane Hatzenbuhler’s controversial “ad-hoc” finance committee has convened in public, but it was former alderman and county supervisor Dybas who spoke in an animated and emphatic voice for the majority of the meeting. The other two advisers to Hatzenbuhler are former mayor Mario Villa and former city assessor and county supervisor Michael Chiara, who was not present. The committee is not officially recognized by the Common Council, thus it’s “ad-hoc” moniker.  Approximately 10 people were in the audience including mayoral candidate Michael Villa. No other elected officials, besides Hatzenbuhler, were present.

The main subject of the meeting, as initially advertised by Hatzenbuhler, centered around the impact of city properties that are delinquent on their tax payments. Dybas pointed out that unpaid taxes can inflate the city’s accounts receivable balance. Taxes that are owed to the city, but remain unpaid, are still counted as assets until they are taken off the tax roles through the foreclosure process. Past controllers, for various reasons, have not run the foreclosure process in approximately five years, so those unpaid taxes have added up. Those unpaid taxes also factor into calculating the city’s fund balance. If the general fund balance includes assets with no actual cash backing, that balance could indicate a better financial picture that what really is.

However, when reached for comment today, Controller Matt Agresta said the city already expects and deals with the issue of unpaid taxes in its budget using a standard process called an “overlay.” Basically, the city budgets with the expectation that a certain percentage of taxes will remain uncollected, and the overall tax levy is adjusted upward to compensate. This practice helps reduce the effect of unpaid taxes, strengthening the city’s actual cash position in relation to the reported fund balance.

The long-term solution, accounting-wise, to the problem of unpaid taxes is to run the foreclosure process every year. That way, the expected revenues from delinquent properties are not counted as an asset year after year. Agresta has already taken on the enormous foreclosure process and has made more progress than any of his recent predecessors. According to Agresta, the critical step of sending out certified letters to all lien-holders of the delinquent properties and publishing the properties in the newspapers was completed just over a week ago. Agresta said today he was optimistic that the letters would spur many owners to catch up with their payments and generate additional revenue on top of the approximately $650,000 in back taxes collected already since the delinquent properties were announced earlier this year. After this foreclosure process is complete, Agresta said he intends to continue to run the foreclosure process every year afterward, as long as he is in office.

It’s worth noting that Dybas passed out a seven page document on which he showed how he estimated the city’s delinquent taxes, including city, county, school district, utility fees, and interest and penalties, from 2009 to 2013 to be approximately $7 million.

I’m not sure why Dybas felt he needed to do all this work, because Controller Matt Agresta already calculated the city’s total delinquent taxes and fees to be approximately $13 million on approximately 600 delinquent properties. The figure was widely reported in the media and is certainly no secret. Dybas’ figure comes out low, because according to his sheet, he only figured on 200-350 delinquent properties, and by his own admission, did not factor in the extra user fees for multi-unit buildings.

According to Agresta, out of that $13 million total, approximately $4.2 million is interest and penalties, which is not booked as anticipated revenue. Under NY State law, the city has to remit taxes owed to the Greater Amsterdam School District, whether the taxes have been paid or not, however that is not the case for the county. So according to Agresta, only the city taxes (which includes re-levied user fees)  which amount to $5.1 million, and the school district taxes, which amount to $1.9 million, actually affect the city’s cash position relative to its fund balance.

So in the end, the overlay mitigates the impact of unpaid city and school taxes on a year-to-year basis, while the foreclosure process, which is already underway, will straighten out the problem long-term. The situation is difficult, but its by no means terminal. But from listening to Dybas, you would think we were heading toward the apocalypse.

Unfortunately that apocalyptic tone carried through with the rest of the issues he covered. He repeated the claim he made earlier in the year that the city’s assets were in the negative, because according to the 2012-2013 Annual Update Document, the city’s debt exceeded the reported total fund balances by approximately $10 million. I covered the subject before as to why this statement doesn’t really mean much, but suffice to say that as long as the city carries debt, adding the city’s fund balances and subtracting the debt is almost always going to be negative as long as the city borrows funds for capital projects. Dybas has yet to include the city’s fixed assets (buildings, equipment, etc) that the 2012-2013 AUD reports to be worth approximately $50 million in his calculations. By adding this figure to the equation, the city’s total assets are positive by approximately $40 million. Certainly, the less debt the better, but the very fact that the city has debt is nothing to panic over. The city maintains an A- with a stable outlook rating by Standard and Poor and there’s a good reason for that.

Dybas also brought up the fact that previous audits of the city’s books by an independent auditor have either not been completed yet or were incomplete. Again, this is a known issue. The city hired an accounting firm two years ago to help straighten out problems with the city’s books, due in large part to the transition from using Montgomery County’s computer system for accounting, to the city’s own KVS accounting system in 2011. That work has been ongoing, but has resulted in the successful re-filing of previous year’s AUD’s through 2012-2013. The submission of the most recent 2013-2014 AUD is nearly complete, according to Agresta. While the AUD’s are not the same as a third-party audit, they still mark significant progress as they require the city’s books to be adequately reconciled such that the controller can sign his name to it.

The Amsterdam Common Council, not the controller, is responsible for initiating the audit, and has only budgeted for one audit to be completed this year. That audit is currently in progress for the 2012-13 fiscal year. Agresta says that only minimal audits have been done on previous year’s books, enough to make sure that federal funding to the city is not interrupted. Agresta has recommended the council concentrate on auditing the most current years, but said he would cooperate with any audits the council wants to undertake.

As the meeting dragged on, the discussion went downhill in my opinion. Members veered into the realm of unfounded accusations that receipts for Recreation Department, including those for the Spring Fling, Farmer’s Market, and Community Arts Center were not properly documented. Committee members also took aim at the rest of the council members who were not present, with Mario Villa suggesting that they were out golfing.

While a robust discussion of the city’s finances is always a good thing, it’s hard for me to see how this particular meeting accomplished anything positive. The tone of those at the meeting seemed similar to the fearful atmosphere that existed during election time back in 2013. Fortunately, I think the public is more skeptical and informed now, as some of the most dire fears of the time, that the city was on the verge of bankruptcy, and that there were $1.2 million in missing funds, proved to be unfounded. I also give credit to Agresta, who has taken alot of his time since taking office to explain the complex issues surrounding the city’s finances with myself and other reporters, resulting in a much more informed coverage than ever before.

Hopefully, this election season will also see a much more informed discussion on the city’s finances by the candidates. I also hope the conversation will also include ideas to meet the very real challenges that Amsterdam, as well as most Upstate NY cities face each year which is to raise enough revenues to meet its expenses and fix its aging infrastructure. How do we build the city’s economy? How do we attract more businesses to move to the city? Are there opportunities to leverage our existing city fire, water, sewer and sanitation services to bring in additional revenue? These are issues, along with the city’s accounting challenges, that I hope to see addressed by candidates in the coming months.

About Tim Becker

Tim Becker is the owner of AnthemWebsites.com LLC which publishes The Compass. He serves as both editor and a writer.

26 Responses to Hatzenbuhler’s ad-hoc: rehashing known problems while offering no real solutions

  1. Pam says:

    So easy to point out the problems but where are the solutions?

    • Luis says:

      It is said that first you must identify the problems in order to correct them. We have heard for 8 years now from Mayor Thane that we need to plan in order to prosper yet we have not prospered but only gone backwards in economic development. Just look at the hotel, so much talk so much vision but in the end nothing positive. Talk is cheap.

      There is a serious need for change now and real economic development.

      • Tim Becker says:

        “…first you must identify the problems in order to correct them” – I certainly agree with that, but I found no new problems identified at this meeting, or weren’t already in the process of being corrected.

        Depends on what you look at and how you look at it as far as economic development in the city. We all wish the hotel were further along, but at least it’s had buyers and the city hasn’t had to take ownership of it and that’s a good thing, and not for lack of effort from the city and county. I see progress on both Main St and Bridge St, Clock Tower, Walter Elwood Museum. Certainly I don’t attribute all of that directly to the city’s policies, but it’s encouraging to me and others that the trend is going in the right direction.

        If someone’s got a better idea as to how to do economic development, I’m all ears. There’s been no mention of it from the Common Council in the past year and a half. The majority’s take seems to be that it’s the job of the county. I’m all for cooperating with the county on big projects, but we still need a local plan.

      • Luis says:

        Tim,
        Your correct on some of your points. Although the city has had its own local economic development dept. now working in concert with the county. The hotel case was a gleaming example of the different views between the county and city and quite frankly the county had it right but the city well we know today had it all wrong. There will be no Waterpark within any hotel downtown in the near future.

        Yes there has been progress but when you step back it’s not any greater or better than what’s gone on in the past. What’s really problematic is the net loss of jobs within the city in the last 5 years.

      • Tim Becker says:

        I’m not sure if I follow in regards to the waterpark. Last I read, that was an idea for down the road, but the plans to make it a hotel are still going forward. Or did I miss something? The county seemed to want to put something other than a hotel there. But the downtown business owners definitely want a hotel. That’s why we still need an economic development person here in the city, to advocate for what is in the city’s best interests.

      • Luis says:

        Tim,
        It’s not just downtown businesses that want or need a local downtown hotel but so do the residents. Check w/Mayor Thane and Rob. It’s my understanding they know that the 2nd hotel deal fell through.

      • Tim Becker says:

        Yes, agreed about residents wanting the hotel as well. I will follow up on the status.

  2. diane hatzenbuhler says:

    There have been issues with the audits done by the current firm and until there is an independent audit of all departments by qualified CPA’s, I do not feel we have been given appropriate information to move forward.

  3. Dan Weaver says:

    If I understand your opinion piece, only $7 million of the $13 million will “actually affect the city’s cash position relative to its fund balance.” Your position is that the overlay will mitigate that. However you do not state what the overlay is. According to the latest budget, it is $507,547. That figure assumes that almost 93% of the $7 million will be collected Do you believe that is a likelihood?

    The $650,000 already collected is also a very small percentage of the total–only 5% of the $13 million.

    While the city assets are greater than its debts, that information is only useful if the city was to go bankrupt and all those assets were sold to pay off creditors. If those assets (City Hall, the Public Safety Building, etc.) were sold off now, the city could not operate. Since those assets cannot be liquidated if we want the city to keep operating, it serves little purpose to use them to defend the city’s current financial situation. Items no longer needed by the city are auctioned off every year and are included in the city’s budget.

    I am glad that Agresta is going to hold a foreclosure every year. That is as it should be. The lack of a foreclosure process for many years in a row has had a negative impact on the city’s financial situation. It has also led to the deterioration of some housing to the point the city will have to pay to demolish it rather than collect money from the sale of it.

    I would also note that an ad hoc committee means a committee that meets for a single purpose. It has nothing to do with whether or not it is approved by the common council or anyone else.

    • Tim Becker says:

      Hi Dan. Remember the $7 million in city and school taxes is *cumulative* over the past five years or so. If the overlay adds an average of $500,000 per year for five years, then that’s $2.5 million against the $7 million.

      Please keep in mind – “mitigate”, by definition, does not mean it solves the problem, it means it makes it less severe.

      The main issue with the city’s debt is the ability to make the payments. Most cities and businesses utilize debt in some way. I mean, if someone wants to argue that the city shouldn’t hold any debt, then that’s one thing. But to simply subtract the city’s debt from the fund balances and get upset that it’s negative is not constructive, in my opinion. If we had enough in fund balance as we did in debt, then why would we need to borrow in the first place? The example of adding in fixed assets just shows how you can play with numbers all day and not really have a practical discussion about debt. However, I don’t think fixed assets are meaningless. Any credit rating is going to factor those in. They aren’t negligible.

    • Michael Donnan says:

      Mr. Weaver, the mistake Dave Dybas is making is failing to account for people getting caught up on their taxes to avoid foreclosure. His figure of 350 is totally arbitrary and not based on historical trends. The proper way to make a projection would be to look at how previous foreclosure lists evolved through the process. If I recall correctly the last foreclosure list started with 400 buildings and end up with around 100 actually going to foreclosure. This time the initial list had 600 on it. The latest list was down to 473- but that’s months old. The total may already be below the 350 Mr. Dybas used for his projections. In the end it’ll be closer to 150 than 350. It’s easy to avoid your taxes for a while but people will go to great length to avoid forclosure including home equity loans, tapping retirement funds,ect.
      Mr. Dybas also used $50,000 of assessed value for the homes because that’s the approximate value of the average home in the city (if I understood what he said correctly). Logic and history will tell you the average home that gets foreclosed on will be of lesser value than the average home in the city. Generally they’ll be small, run-down houses in bad neighborhoods.

  4. Dan says:

    Delinquent taxes are cumulative, but would you show me in the budget where the overlay is cumulative. A pint of water will mitigate my thirst in a place without water, but cold comfort that is if there is no more to follow. I will respond to the rest on my show thursday.

    • Tim Becker says:

      The overlay is applied every single year, not sure how else to answer your question. Check lines 35 through 40 on the “tax rate calculation” tab on the 2015-2016 budget. Every year some delinquent taxes are collected, and the overlay is adjusted accordingly.

      Dan, I’m interested to know from you, what do you think the city should be doing right now, that it’s not already doing, to address these problems? We all know the problems exist, so what can we do to improve the situation? That’s what I’m interested in discussing – a better way forward.

      Do you agree with Dybas’ somewhat flippant suggestion to spend a million dollars hiring another accounting firm? How will that improve the situation? The other two options he suggested (but did not endorse) was bringing in a NY State control board, or raising taxes. What do you think of these ideas?

      I appreciate you mentioning the Compass and discussing the article on your show. I’d be glad to see your response at some point on the comments section here though. Thanks!

  5. Dan Weaver says:

    I may not be able to mention the name of the Compass on the show as the Recorder is a sponsor of the station. The last guy who mentioned the Gazette lost his talk show.

    There is much more that can be done. Doing a foreclosure yearly is one. Ann’s proposed legislation to make it easier and less time consuming to close up and protect vacant property to keep it from deteriorating is another. The ambulance service might even prove to be a good idea. Why then wait until an election year to make these suggestions.

    Anyway there is much more to be done, but it would take more time than I have to write about it here. i will discuss as much as I have time for on my show. I also need to do more research–for example the City’s debt load compared with its ability to pay it back.

    Many of Dave’s answers are not the best answers. Nevertheless, the more I look at Amsterdam’s financial picture combined with delinquent taxes, vacant and blighted buildings, tax load on its citizens, etc. I am more and more concerned about it. The audit by the state that was released in January 2014 was not flattering. Ann’s response was essentially rejected by the comptroller’s office. The common council’s unanimous response which agreed with the state’s findings was for some inexplicable reason not included in the final draft. I have a copy of it. This audit seems to ignored a lot when the city’s finances are discussed.

    Another audit might be necessary to really get the city’s finances straightened out. I would not count it out. Raising taxes would be hard to do for economic and political reasons. To a certain extent, what has taken place or not taken place in the past 8 years and more has everyone’s hands tied.

    While Dave and the others might not have the right answers, they are at least raising legitimate questions that cannot be answered simply by saying “that’s nonsense.”

    • Tim Becker says:

      Good thoughts.

      WCSS didn’t seem to have problem with me mentioning the Compass earlier in the year when I was on, but if it’s not possible, I understand. Just would be nice to get a reciprocal plug 🙂

  6. Dan Weaver says:

    It is possible that when they let the other person go they were just using the mention of the Gazette as a pretext. Not sure what you mean by a reciprocal plug. Do you mean you have been plugging the Recorder or WCSS? By the way, I have mentioned the Compass in the past, but not without some trepidation. Lately I have avoided mentioning any local media except for the Recorder because they are a paid sponsor.

    • Tim Becker says:

      Although you didn’t mention WCSS by name, earlier in the comments you plugged your Thursday radio. And it sounded like you were going to refer to my article, which would require a citation. I was being a bit persnickety about it, but this morning I am over it, no worries 🙂 But if you are saying WCSS/Recorder is sensitive about things like that, can you blame me?

  7. Dan Weaver says:

    Don’t forget Tim, that you got many, many weeks of free advertising by appearing on your father’s show. I think you would have to mention the station multiple times to make that reciprocal. Anyway, if you would like to appear on my show tomorrow, we could have a conversation about the city’s finances. I can ask Joe if it is okay to mention the Compass. If not, you can be billed as Tim Becker, average Amsterdam homeowner. If you don’t want to come on the show, I will simply discuss city finances without mentioning your column at all. It is not necessary for me to do that to talk about the things I want to talk about. I had planned on making this my Thursday topic after attending Saturday’s meeting. I would have talked about city finances on Tuesday, but I already had a guest scheduled to talk about national and international economics.

    • Tim Becker says:

      Yes of course I did, and Joe had no problem with it. That’s why I was surprised that a mere citation would cause a problem. But again, no big deal.

      I had the Recorder’s logo on my site for an entire month promoting the Spring Fling in an ad as part of my sponsorship. Does that make up for it? 🙂

      Thank you for the offer to come on your show. I can’t make it tomorrow, but would be glad to consider it in the future if you like.

  8. Dan Weaver says:

    No because the Recorder and WCSS are two separate entities.

    • Tim Becker says:

      Well another way to look at it is they got engaging material from me for those hours, including Dybas calling up and pummeling me on several occasions with the Socratic Method, which I am sure many people found entertaining. So it was a fair trade in my opinion 🙂

  9. Dan Weaver says:

    You can come on the show Saturday from 11-Noon or next Tues or Thurs from 10-11 or the week after if that does not work.

  10. rogo says:

    I ask the main question how much money is amsterdam bank account?? As of 6/30/2011 or 6/30/2012 6/30/2013?? one of these closeout dates there must be a number. If not this adminitrastion has buffaloed the people!!

    • Tim Becker says:

      I see bank account balances listed in the AUD’s for 2012 and 2013. Surely you’ve read them by now, right? Do you believe those numbers are accurate?