City officials could easily budget a 0% tax increase this year. So why don’t they?

A “virtual public hearing” will be held on Monday June 29 at 3:30PM before the Amsterdam Common Council votes whether to exceed the New York State 2% tax cap for the 2020-2021 fiscal year.

Residents will be able to communicate their thoughts on the subject and ask questions via the comment section on the city’s Facebook page once the live video starts.

Exceeding the tax cap is a serious decision, and city residents need to hold our elected officials accountable for how they make this decision.

The mayor’s proposed budget calls for a 4.68% property tax rate increase. While the council has proposed some changes to the mayor’s budget, the final tax rate will most likely still exceed the cap.

But is the increase necessary? Last week, I would have said yes. But now, I believe the answer is no. In light of recent developments, it appears it would be easy for the council to keep the increase below the cap or eliminate the increase completely.

I say that because at Monday’s common council budget meeting, Controller Matt Agresta announced the city was able to secure an incredibly good 1.98% interest rate to borrow $7.7 million to fix it’s fund balance deficit problem. Mayor Michael Cinquanti’s proposed budget figured on an interest rate of about 6%, which was not an unreasonable estimate given the city’s credit status. As a result of securing the lower interest rate, Agresta said that the general fund’s interest expense line could be cut by $250,000.

From covering the council’s budget meetings for the past six years, I know a general rule of thumb that the controller uses is that for every change of $50,000 in revenue or expenses, the tax rate changes by about 1%. So a decrease of $250,000 in expenses easily wipes out the proposed 4.68% increase for the 2020-2021 fiscal year.

As a double-check, I used the original Excel spreadsheet document for the 2020-2021 budget which has built-in formulas for calculating the tax rate. If I reduce the total bond anticipation notice (BAN) interest number for the year by $250,000, the spreadsheet calculates a .09% decrease in the tax rate.

So why didn’t the council reduce the tax rate? They know all too well the public hates tax rate hikes.

Instead of lowering taxes, the consensus of council members at the committee meeting was to decrease the inter-fund transfer from the water fund to the general fund.

What good will that do? It will increase the water fund balance at the end of the 2020-2021 fiscal year by $250,000.

But why do we need to do that? Agresta has said on the record, that his “conservative” estimate is that the water fund will have $800,000 to $1 million at the end of the fiscal year if actual expenses and revenues stay close to budget. Isn’t that enough?

Well, it’s certainly not enough to do another $1.6 million transfer as the city has budgeted in the current and past year. But it would still be a healthy balance.

The fact remains, however, that Agresta has yet to substantiate his $800,000 to $1 million projection.

I’ve shown very clearly, using only simple math and the budgeted revenues and expenses for the water fund for the current and next fiscal year, that the correct estimate for the end-of-fiscal-year balance is only $163,807.

So which is it? If the council members believe I’m right, they should say so. The threat of a low fund balance is the only thing that would justify reducing the transfer and keeping the tax rate up. But then, Agresta would need to answer for his estimate.

If Agresta is correct, then why not use the $250,000 cut to lower taxes?

Something’s got to give here!

I have asked Agresta via email, and also during the virtual “public hearing” on the budget on Monday to point out where I’m wrong and to justify his own estimate. He’s never answered. I have asked at least three council members to justify Agresta’s estimate as well, and they can’t either.

So maybe, just maybe, they did the same math I did? If so, the question still remains why Agresta would go on record with such a high estimate? Perhaps this is proving just too uncomfortable a question for our mayor and council members to address in public?

At the heart of the issue is water rates. If approved, this budget would mark an unprecedented three years in a row without any increase to the water rate.

By keeping water rates the same, the water fund has not been able to generate enough surplus to sustain transfers to the general fund.

Because we charge users outside the city 50% more for water than users inside the city, a water rate increase pays for itself and then some. It’s in our best interests to charge a rate that will ensure a significant transfer can be made every year.

Now some city residents think we shouldn’t do this. At Monday’s meeting, alderman Jim Martuscello said he was against raising rates and wanted to move the city away from relying on water fund revenues. Agresta went further and said that New York State wouldn’t “allow” the city to keep transferring water funds to the general fund.

Strangely, he said this back in 2018 as well, and he’s never substantiated that view. In fact, he all but admitted he was wrong back in 2018 when I challenged him on that very same issue, when I pointed out that New York State law very specifically allows us to set rates to generate a surplus for the purposes of lowering our taxes.

So why does this idea, that clearly goes against the best interests of the city, persist even when it’s been decisively dis-proven?

All I can say is, we need our elected officials to level with us. And the only way they will do that is if enough residents show up for public hearings and ask questions.

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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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