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Purpose of Budget Review

The purpose of our budget review was to determine whether the significant revenue and expenditure projections in the City’s proposed budget for the 2019-20 fiscal year are reasonable.

Background

The City of Yonkers is authorized to issue debt not to exceed $45 million to liquidate current deficits in the City School District’s general fund as of June 30, 2014. Chapter 55 of the Laws of 2014 requires the City to submit its proposed budgets for the next fiscal year to the State Comptroller and the Commissioner of Education for review while the deficit obligations are outstanding.

Key Findings

• The Yonkers Public School District’s budget request is $645.3 million for appropriations, which has a budget gap of at least $17.6 million for pending additional State funding that is not supported. The District has appropriated $7.8 million of projected unassigned fund balance at the end of the 2018-19 year; however, this appropriation must be approved by the Board of Education and City Council before it can be used. If the fund balance is not approved or available at year end, the District could have a $7.8 million budget gap.
• The District’s budget request includes a $4.2 million appropriation for the purchase of textbooks, software and equipment. However, the City’s capital budget also includes up to $4.6 million for this acquisition. These are recurring District expenditures and should be included as an appropriation in the annual budget.
• The City continues to rely on nonrecurring revenue, such as specialized State aid and fund balance, to balance its budget.
• Revenue estimates for metered water sales, sewer rents and income tax surcharge may not be achievable.
• The City will incur additional debt and interest costs by bonding the cost of tax certiorari claims instead of financing them through the operating budget.
• The appropriations for police overtime and bond anticipation note (BAN) and revenue anticipation note (RAN) interest could be underestimated.
• Under the proposed budget, the City will have exhausted 89.3 percent of its constitutional tax limit. We caution the City that if property values do not increase, its ability to increase taxes may be reduced in future years.
• The water fund may be subsidizing the general fund for services not related to the water fund by as much as $3.7 million.

Key Recommendations

• Evaluate the expectation of receiving $17.6 million in additional State aid, close the budget gap and amend the proposed budget as necessary.
• Develop a plan to fund District operations and discontinue the practice of relying on one-time revenues to finance recurring expenditures.
• Either approve the appropriation of fund balance or eliminate the potential funding gap if fund balance appropriation is not approved.
• Develop a plan to maintain fund balance at a reasonable level.
• Identify alternatives to borrowing funds to purchase textbooks and related software and equipment.
• Review the estimates for metered water sales and sewer rents and amend as necessary.
• Adjust the appropriation for tax certiorari payments and provide a financing source for tax certiorari refunds or settlements.
• Review the estimate for police overtime and increase it to an appropriate level.
• Review the estimate for BAN and RAN interest and amend as necessary.
• Perform a detailed analysis to ensure that cost allocations charged to the water fund are related to water operations.