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 2015 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 declining financial position and the proposed increases in revenues for the sewer fund’s 2015 budget do not appear reasonable.
• The water fund’s cash balance has steadily declined over the last several years and projections indicate that the fund will end 2014 in a deficit cash position.
• The City’s 2015 proposed budget does not appropriate enough money for contingencies to provide adequate flexibility to pay for unanticipated costs.
• The City’s 2015 proposed budget continues to provide minimal funding for capital improvements and, having nearly depleted its capital reserve, is issuing debt to fund capital expenditures.
• Due to a change in accounting for retirement expenditures, the City will be required to recognize increased retirement costs in future years.
• The City’s proposed budget is in compliance with the tax levy limit.

Key Recommendations

• The City should adopt a reasonable 2015 budget for the sewer fund and develop an adequate 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.
• Begin developing a plan for the anticipated increase in retirement appropriations.