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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 2020 fiscal year are reasonable.

Background

The City of Newburgh, located in Orange County, is authorized by Chapter 223 of the Laws of 2010 to issue debt not to exceed $15 million to liquidate the accumulated deficit in the general fund as of December 31, 2010. During the time that Chapter 223 is in effect, the City’s proposed annual budgets must be submitted to the State Comptroller for examination and recommendations.

Key Findings

• The City’s proposed budget includes appropriations of $68,298,071.
• The proposed water fund budget includes $5.1 million in metered water sales revenue, which appears reasonable, pending Board approval of water rate increases.
• Budgeted overtime funding for police ($1.1 million) and firefighters ($800,000) is likely underestimated by a total of at least $910,000.
• The budgeted $565,000 in severance payments does not include appropriations for budgeted layoffs in 2019, and may not be sufficient if the layoffs do not take place until 2020.
• The budgeted $50,000 for unemployment insurance may be underestimated by up to $291,000, based on proposed layoffs.
• The proposed $581,000 in contingency appropriations may not cover unexpected expenses if these funds are used to pay underestimated police and overtime costs.
• Under the proposed 2020 budget, the City will exceed its Constitutional Tax Limit (CTL); however, City officials indicated they decreased the levy to be within the limit.
• The City faces potential increased salary costs when its collective bargaining agreement (CBA) with the International Association of Fire Fighters, which expired in 2017, is settled.

Key Recommendations

• Pass a resolution to raise water rates prior to the adoption of the budget, or lower the estimate for Sale of Metered Water.
• Adopt a budget that includes a tax levy no greater than the CTL; and no greater than the tax levy limit (tax cap), unless a local law is adopted to override the limit.
• Review the estimates for police and firefighting overtime and increase them as appropriate, or implement changes in procedures to manage costs within budgeted amounts.
• Review the budgeted estimates for severance payments, unemployment insurance and contingency funds and adjust them to appropriate levels.
• Review staffing reductions and, if reductions are not made, adjust the salary and employee benefit appropriations to an appropriate level.
• Review the estimate for potential CBA settlements and consider establishing and funding a specific contingency fund.