Purpose of Budget Review

The purpose of our budget review was to provide an independent evaluation of the City’s proposed budget for 2019.

Background

Chapter 332 of the Laws of 2014, as amended by Chapter 147 of the Laws of 2015 (the “Act”), authorized the City to issue debt to liquidate the accumulated deficits in the City’s general, refuse, water and sewer funds as of December 31, 2013. The Act requires the City to submit to the State Comptroller each year, beginning January 1, 2015, and for each subsequent fiscal year during which the debt incurred to finance the deficit is outstanding, the proposed budget for the next succeeding fiscal year.

Key Findings

• During our initial review of the proposed budget we identified errors in general fund appropriations that resulted in a budget shortfall of $23,074.
• Based on the results of our review, except for matters described in this letter, the significant revenue and expenditure projections in the proposed budget appear reasonable.
• The City did not appropriate any fund balance as a financing source in the 2019 general, water, sewer, or refuse fund budgets and unrestricted fund balance in the general, water, sewer and refuse funds were approximately 15.7 percent, 31.7 percent, 21.6 percent, and 27.1 percent, respectively, of the following year’s budgeted appropriations.
• City officials did not provide evidence that they prepared cash flow estimates for 2019, which would have allowed the City to determine if unrestricted fund balances in the water, sewer and refuse funds were adequate.
• Two of the City’s collective bargaining agreements (CBAs) have expired and 36 City employees are retirement eligible and due buyouts totaling up to $864,000, if they retire in 2019.
• The proposed budget includes a tax levy of $12,671,920 which is the maximum levy that the City can impose without the Common Council needing to override the tax levy limit.

Key Recommendations

• City officials should ensure that the proposed budget is mathematically accurate before presenting it to the Common Council.
• City officials should assess whether the unrestricted fund balance is sufficient for their particular situation considering various factors such as the timing of receipts and disbursements and the volatility of revenues and expenditures.
• City officials should prepare and analyze 2019 cash flow projections to determine if unrestricted fund balance is adequate for the water, sewer and refuse fund.
• The Common Council should consider whether the contingency appropriations are adequate if CBAs are approved and unanticipated retirements occur.