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The general fund balance deficit has been the elephant in the room this budget season

The latest audit reports show a soaring $5 million deficit in the City of Amsterdam’s general fund balance, however after sitting through four budget meetings this past week, I have yet to hear any concrete plan to fix the problem. The negative fund balance has been the “elephant in the room” in the truest sense of the expression. As it stands now, neither the mayor’s or common council’s budget puts us on a path back to a positive fund balance.

Simply put, the problem is a result of revenues falling short of expenses for the past three years. So doesn’t it seem reasonable to think that in order to make up for those years, we need to start creating budgets that plan for revenues to exceed expenses?

I was bracing myself for a large tax increase this year and I wasn’t surprised that the mayor’s budget had one of the largest in many years. When I got my hands on the actual budget, I was looking for some sort of indication that the increase would go toward a surplus that would at least put a dent in the problem, but I found nothing. The increase in taxes was completely due to increased expenses, particularly in the public safety budgets and an increase in debt service.

I spoke with Mayor Michael Villa last week about the issue. Citing projects such as the proposed residential and banquet hall development on the former Chalmers property, the proposed hotel near thruway exit 27, and the recent opening of The Castle hotel, he told me, “I can see possibilities where our revenues are going to increase on their own without putting this burden totally on the taxpayers.”

I certainly share the mayor’s optimistic outlook and I hope these projects are completed and begin to build back our tax base. But with the exception of The Castle, which is already open, the other two projects are promising, but neither is a sure thing. And even if both projects come through, if the owners apply for payment in lieu of taxes agreements (PILOTs), then the full tax revenue on those properties may not be realized for several years.

The latest audit report does mention some ideas that speak to the problem, such as the recent termination of the transportation department, a $200,000 per year savings on health insurance, running the foreclosure process on a regular basis, and asking for more aid from New York State.  The council also wisely cut from the budget a projected $300,000 revenue from the sale of the Chalmer’s property, so if that closes before the end of the fiscal year as everyone hopes, that will be a windfall for the city. These are all good ideas, but in my opinion do not constitute anything close to a real plan to get back on track.

So what should we do? The thing no one wants to do: raise taxes to create a surplus in the budget. I believe the council did the right thing using water fund balance to reduce the tax rate proposed by the mayor from a 7.32% increase to .76% increase over last year. Adding a 5% increase to the tax rate, while leaving expenses where they are, would generate a surplus of $250,000 which would at least take a chip out of the deficit. For an owner of a residential property assessed at $80,000, that would amount to approximately $96 more in taxes per year. If we can maintain a surplus of at least that much every year, we’ll be positive in about 20 years.  Let that sink in for a second.

If we don’t take steps any steps, I believe the city will face cash shortages that may at some point interfere with operations. The city has already felt it necessary to borrow $2 million for operating expenses, and I predict we’ll probably see more borrowing of that type in the future. Borrowing like this increases our debt service, which makes it even harder to balance the budget.

Have a better idea? I’m all ears. Feel free to outline your well-thought-out plan in the comments section.

Now I’ve heard sentiments expressed by officials and commenters lately that because the deficit was the fault of “past administrations” that somehow the taxpayers shouldn’t have to bear the burden. Frankly, that attitude is fanciful. Should we send a $5 million bill to former controller Heather Reynicke for her contribution to the problem? Good luck with that. The cold hard truth is that taxpayers always bear the burden, whether we like it or not. Crying about how unfair it is solves nothing.

If people want to hold past city officials responsible for the problem, that’s fine, but just remember that for most of the time, they did not have audited reports by which to make accurate decisions. The officials in office today do have them. So how much more should we hold them accountable for fixing the problem?

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About Tim Becker

Tim Becker is the owner of Anthem Websites Inc. which publishes The Compass. He serves as both editor and a writer.
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