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City of Troy – Budget Review (B5-13-20)

Issued Date
November 18, 2013
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Purpose of Audit

The purpose of our budget review was to determine whether the significant revenue and expenditure projections in the City’s proposed budget for the 2014 fiscal year are reasonable.

Background

The City of Troy, located in Rensselaer County, issued debt totaling $21,630,000 to liquidate cumulative deficits in the City’s general fund for the years ending December 31, 1993, 1994, and 1995. Local Finance Law requires all local governments that have been authorized to issue obligations to fund operating deficits to submit their tentative budgets for the next fiscal year to the State Comptroller for review while the deficit obligations are outstanding.

Key Findings

The City’s proposed budget, while generally reasonable, needs improvement to make it a better tool for prudently managing the City’s resources.

  • The sewer fund continues to display a trend of weakening financial position and the proposed increases in revenues for the sewer fund’s 2014 budget do not appear reasonable.
  • The City’s 2014 proposed budget includes a transfer of $2.5 million from the water fund to the general fund which, if the water fund realizes similar results of operations in 2014, will likely cause a decrease in the fund balance of the water fund.
  • The City’s 2014 proposed budget does not appropriate enough money for contingencies to provide adequate flexibility to pay for unanticipated costs.
  • The City’s 2014 proposed budget provides only minimal funding for capital improvements: the City’s 2014 capital plans are underfunded by over $1.4 million.
  • The City’s proposed budget is in compliance with the tax levy limit.

Key Recommendations

  • The City should adopt a reasonable 2014 budget for the sewer fund and develop a strategy to finance the short-term and long-term liabilities related to the Combined Sewer Overflows Long Term Control Plan.
  • The City should develop a plan to mitigate any potential future declines in the water fund.
  • City officials should budget appropriately for contingencies.
  • City officials should identify reliable funding sources for capital expenditures and include these funding sources in their operating budgets.