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Lack of information hampers productive budget discussions

It was a bit confusing what exactly got accomplished at the special council meeting that was held Tuesday morning, but a number of interesting viewpoints came out in regard to the pending adoption of the 2019-2020 budget, which I believe will be a pivotal point in the city’s economic recovery. The problem that left me scratching my head after the meeting, however, was how much of the discussion was based on missing or incomplete information at a time when the city’s economic data is the most accurate and up-to-date that it’s been in many years.

The only item on the agenda was a local law that would allow the council to pass a budget with a property tax increase that exceeds the New York State tax cap which is defined as either 2% or the rate of inflation, whichever is lower. The mayor’s proposed budget includes a 5.59% total increase, the council’s version, which incorporates changes agreed on by a series of unofficial votes over the past few weeks, raises that figure to an 8% increase. User fees will also increase – I’ve listed a summary of current vs proposed tax rate and user fees at the end of this article.

The mayor’s budget was constructed with the goal of achieving an approximately $300,000 surplus which would reduce the city’s general fund balance deficit, which according to the latest audit, stands at $5.9 million as of the end of the 2017-2018 fiscal year.

The council preserved the target surplus, as well as made their own adjustments, the largest of which was an approximately $100,000 increase to the police department budget to reflect recently negotiated raises.

Alderman Jim Martuscello, the finance committee chair, explained the tax increase was necessary in order to strengthen the city’s case for applying for permission from New York State to seek deficit financing – borrowing that would eliminate the general fund deficit, as well as deficits in the transportation and golf course funds.

Before the vote, Mayor Michael Villa said, “Without the approval of this [local law], the debt financing will not be brought to the [state] assembly floor or the senate floor.”

The deputy city clerk called the roll, and all five council members voted yes. However, the deputy clerk later pointed out that the text of the local law indicated it was on the agenda for “introduction.” The council then decided to have a public hearing on the local law at a special meeting Thursday before taking an official vote. But that meeting was cancelled, and so now the hearing is scheduled for next Tuesday at 5pm.

Although there were about a dozen members of the public attending the meeting, including two uniformed police officers, there was no opportunity given for them to speak, as is standard during special meetings. However, as the council moved on to a committee meeting to discuss the budget, a woman in the audience whispered, rather audibly, a rather rude comment as to her opinion of the intelligence of city officials.  

I’m pretty sure that comment, along with other grumblings coming from a few of the residents, is what spurred Alderman Dave Dybas to comment.

“What got us in trouble in the past is – notice I said ‘us’ – is we unrealistically reduced things,” he began, most likely referring to the chronic underestimation of expenses (and overestimation of revenues) over the years that has led to the general fund deficit.

“The time has come to pay the fiddler his price,” he continued. “Sorry – if you want to blame that on people – alright, blame it on me. The point is – if you don’t get out of the mess that’s been created now, you’re never going to get out of the mess. If the state comes in, it’s going to be twice as bad. So that’s the dilemma we’re faced with.”

He added, “Past administrations – plural – going way back got us to where we are today. It’s up to us to fix it.”

Alderman Pat Russo concurred, citing past tax increases in the City of Troy when a New York State control board took over the city’s finances.

Martuscello asked the council members for any final ideas to reduce the tax rate.

“We have to cut our costs,” said Alderman Irene Collins

Martuscello pointed out that there had been opportunities to suggest cuts to expenses during the budget sessions over the past few weeks.

Dybas said, “We also had the opportunity to refuse all the wage increases…We also had the opportunity to cut fire or police, but we didn’t.”

Given the golf course fund has its own deficit, and has used transfers from the general fund in the past to cover shortfalls, and with the clubhouse closed this season for renovations, Collins suggested suspending operations at the golf course for the fiscal year.

“Stop the golf course for one season until everything gets up and running again- [until] the clubhouse is finished,” she said.

At this point, Controller Matt Agresta spoke up and said, “The budget as it’s presented would not be affected at all if you cut the golf course – if you added to it, cut it, set it on fire, it wouldn’t change anything in the general fund.”

“It’s still creating a deficit,” said Collins.

And then, in a rather contentious voice, Agresta said, “I thought we were talking about the general fund and the tax rate, not the golf course fund.”

So Martuscello polled the other council members as to whether to cut the golf course budget, and only Dybas agreed with Collins’ idea, and so the issue is presumably put to bed for now.

But Agresta was wrong. At the last budget committee meeting, council members reduced the expected revenue from the clubhouse. In order to balance the golf course’s budget for the coming fiscal year, the council’s budget calls for $34,425 to be transferred from the general fund to the golf course fund. I asked Agresta after the meeting about it, and after checking, he agreed that was the case.

So it does affect the property tax rate. Not by much, probably just over half a percent, but still, the whole conversation was based on a flawed premise. Both the controller and the alderwoman could have had the information at their fingertips as the updated budget was created by Agresta and emailed to all the council members last Thursday.

Another similarly flawed discussion happened next as Martuscello suggested increasing the fund balance transfer from the water fund to the general fund by $25,000. According to Agresta, the move would reduce the tax rate increase by a half percent while leaving the water rate unchanged.

Now the budget already calls for a $1.6 million transfer from the water fund to the general fund, and this is a good thing as the water fund rates, which are paid by city residents as well as customers in the towns of Amsterdam and Florida, are set up to  generate a surplus every year. According to the recent 2017-2018 audit, the fund generated a $1.3 million surplus, giving it a $3.4 million positive fund balance.

But Dybas immediately said “don’t go there” and pointed out that fund balance is not the same as actual cash. It’s the difference between the fund’s assets and liabilities. He asked Martuscello and then Agresta, how much actual cash was in the water fund.

None of the city officials had the answer.

At the risk of sounding like a know-it-all tech geek, I had the information up on my phone within a few seconds. I kind of waved my phone in the air at one point in a halfhearted attempt to catch someone’s attention. But it’s not my place to interject during meetings, no matter how tempted.

As of June 30, 2018, the water fund had $141,463 according to the latest audit. So where did the money go? Most likely toward general fund expenses.

According to the audit, other city funds owe the water fund $2.8 million.

What’s happening is that on top of the regular yearly transfer, the general fund has also “borrowed” cash from the water fund. Transfers don’t have to be paid back. But inter fund borrowing does, and that’s counted as a liability to the fund being loaned to and as an asset to the fund being loaned from.

There’s nothing really wrong about any of that except that inter fund loans are supposed to be short-term and paid back within a year and as it stands, that’s not going to happen any time soon. But New York State law explicitly gives the city the right to build up a surplus in the water fund and transfer it to other funds. This benefits city residents as revenues from water customers outside the city helps lower our taxes within the city.

So Dybas’ point was kind of lost on everyone in the room because no one, including Dybas, had the right numbers in front of them.

Would a $25,000 transfer make much difference either way? Not really. But the whole point of this year’s budget is for the general fund to start generating a surplus so that it can start paying back the other city funds. Reducing the tax rate would reduce the general fund revenue, reducing the amount of actual cash coming into the fund that it desperately needs.

In my opinion, Martuscello’s idea seemed like a token effort to reduce the tax rate by a smidgen in order to appease the ornery crowd at the meeting. In the end, an unofficial poll of the rest of the council members showed that no one else agreed with the idea.

So, while the council seems to have reached an uneasy consensus on their changes to the mayor’s budget, it’s not really over until it’s over and voted on officially. That and the tax cap override will most likely take place at Tuesday’s regular meeting, but not before a couple of public hearings.

Current taxes and user fees:

$16.08 per $1000 assessed value
$907.97 per unit

A single-family home assessed at $60,000 pays $1872.77 per year

Proposed taxes and user fees:

$17.37 per $1000 assessed value
$996.89 per unit

A single-family home assessed at $60,000 would pay $2,039.09 per year

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About Tim Becker

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

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