Purpose of Budget Review

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

Background

The City of Newburgh, located in Orange County, issued debt totaling $15 million to liquidate the accumulated deficit in the City’s general fund as of December 31, 2010. 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

Based on the results of our review, except for certain matters, we found that the significant revenue and expenditure projections in the proposed budget are reasonable.

• The proposed budget includes $2 million of anticipated revenues from the sale of tax acquired property. We have not been provided documentation to verify the assessed values of the properties or the required approval from the Environmental Protection Agency regarding the readiness of the properties, specifically the largest property which is listed for sale at $1 million. If these properties are not sold within the 2014 budget year, the City will experience a revenue shortfall of possibly $2 million.
• The City overestimated water metered sales by approximately $280,000 and sewer charges by approximately $272,000 in the budget. We estimate that the City will incur revenue shortfalls in each of these funds for 2013; however, the City planned for the 2013 shortfalls by appropriating fund balance. The 2014 budget does not have any fund balance appropriated for any shortfalls.
• The City’s 2014 budget includes an appropriation of $561,000 of fund balance, which is a non-recurring funding source. Because this is a one-shot funding source, the City will face a shortfall of at least this amount when it prepares its 2015 budget.
• The City’s proposed budget complies with the tax levy limit.

Key Recommendation

• Review projected revenue and appropriation amounts identified in this letter. Review the budgeted amounts of appropriated general and water fund balance. Determine the necessary adjustments or course of action necessary to address the identified issues.