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Purpose of Budget Review

The purpose of our budget review was to provide an independent evaluation of the City’s adopted budget for 2020-21.

Background

Chapter 531 of the Laws of 2019 authorizes the City to issue debt not to exceed $8.3 million to liquidate the cumulative deficits in the City’s general, transportation, sewer and recreation funds accumulated as of June 30, 2018. On June 25, 2020, the City issued bond anticipation notes totaling $7,689,034 for this purpose, which consisted of $5,091,424 for the general fund, $1,321,091 for the transportation fund, $512,675 for the sewer fund and $763,844 for the recreation fund.

Key Findings

• Based on the results of our review, we found that certain significant revenue and expenditure projections in the 2020-21 adopted budget are not reasonable and other matters that require City officials’ attention.
• The City’s adopted water fund budget is unbalanced because the budgeted financing sources exceed the appropriations by $298,382.
• The adopted budget includes estimated revenues for Federal aid, State funding for Aid and Incentives for Municipalities, property registration fees, metered sewer rents and golf course fees which may not be realized.
• The adopted budgets for the general and recreation funds are not structurally balanced because they include subsidies from other funds to finance their operations.
• The adopted budget includes inadequate appropriations for debt service and appropriations for health insurance and Social Security and Medicare taxes that may not be sufficient.
• The adopted budget includes allocations of appropriations for personal services, contractual expenditures and employee benefits between the operating funds using unsupported allocation methods.
• The adopted budget provides minimal funding for equipment and capital outlay and does not appropriate enough money for contingencies in the refuse and recreation funds to provide adequate flexibility for unanticipated costs.
• The adopted budget includes a tax levy of $6,047,472 which exceeds the allowable tax levy limit by $187,957. However, the Council adopted a local law to override the tax levy limit prior to budget adoption and, as such, was authorized to adopt a budget that included a levy in excess of the tax levy limit.

Key Recommendations

• Adopt balanced water fund budgets.
• Develop a plan to balance the budget in the event revenue projections are not fully realized.
• Continue to evaluate and explore ways to make the general and recreation funds self-sufficient.
• Closely monitor appropriations throughout 2020-21 and modify the budget as necessary.
• Develop an allocation plan based on detailed analysis that ensures costs allocated to each fund are directly related to its operations.
• Identify financing sources for capital expenditures and include these funding sources in future budgets.