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Purpose

The purpose of our budget review was to provide an independent evaluation of the City’s proposed budget for 2022.

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, water, sewer and refuse 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

• Based on the results of our review, except for matters described below, the significant revenue and expenditure projections in the proposed budget appear reasonable.
• The City appropriated $583,113 as a financing source in the 2022 general fund budget.
• For 2021, City officials project operating losses in the general, water, sewer and refuse funds.
• The City’s fund balance policy states that unrestricted fund balance in the general fund should, at a minimum, total 17 percent of the following year’s budgeted appropriations. City officials estimate unrestricted fund balance in the general fund will total $7.4 million as of December 31, 2021, which is 27.8 percent of 2022 general fund appropriations included in the proposed budget.
• In 2020 the City lost an arbitration ruling that requires it to hire 12 firefighters. City officials told us they negotiated with the collective bargaining unit to hire four new firefighters each year beginning in 2021 through 2023, which was documented in a written agreement dated November 24, 2020. The 2022 proposed budget includes funding for four new firefighter positions.
• The proposed budget includes overtime funding of $365,000 for the police department, $175,000 for the fire department, $90,000 for street maintenance and $91,000 for water filtration and distribution. The total overtime appropriation is $116,000 more than was budgeted in 2021 and $21,000 more than the projected overtime expenditures for 2021.
• City officials settled the two collective bargaining agreements with various City employees that had been outstanding for several years. The 2022 proposed budget includes a 2 percent increase in appropriations for the estimated salary increase of $90,000.
• The City has 24 retirement eligible employees and, if they retire in 2022, will be due buyouts totaling over $600,000. The City has included only $545,000 in the proposed budget to fund buyouts.
• The proposed budget includes a tax levy of $13,242,097 which complies with the tax levy limit.

Key Recommendations

• Carefully monitor revenues and expenditures and make adjustments as needed throughout the year.
• Assess what fund balance is reasonable for their situation, considering various factors such as the timing of receipts and disbursements and the volatility of revenues and expenditures.
• Ensure overtime appropriations are reasonable when adopting the final budget.
• Consider whether the contingency appropriations are adequate if unanticipated retirements occur.
• Be mindful of the legal requirement to maintain the tax levy increase to no more than the tax levy limit as permitted by law, unless it properly overrides the tax levy limit prior to adopting the budget.