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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 2023 proposed budget were 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 use of approximately $3.4 million of fund balance to close gaps in the budget decreases the fund balance that is available to cover unforeseen circumstances.
• The City has also appropriated approximately $2.5 million of sewer fund balance and appropriated $24,770 of fund balance for the water fund. However, the water fund already has a deficit fund balance of $58,722 and therefore, no water fund balance is available to appropriate.
• The City should refrain from including the $1.5 million revenue and corresponding expenditures in their 2024 adopted budget for the New York State Touring Route Program because there is no assurance the State will appropriate additional money for this program in fiscal year 2024-25.
• The City could potentially face shortfalls based on revenue estimates for sewer usage and sale of metered water.
• The City budget includes a reduction of $2,013,521 in the general fund and $201,683 in the water fund for a “vacancy factor,” a budgeting technique used by the City to account for open personnel positions. However, the use of a “vacancy factor” may not be prudent, as it leaves personnel services appropriations with insufficient amounts to cover expenditures. As a result, the appropriation for personnel services is likely underestimated by as much as $2 million.
• Budgeted overtime funding for police $1.1 million is likely underestimated by a total of at least $715,000.
• The proposed budget does not include a contingency appropriation in the general fund.
• The proposed budget does not include a tax overlay, which could potentially create a revenue shortfall in 2024.
• During our review of the City’s proposed 2024 budget, two conflicting proposed budget documents were posted to the City’s website. Although variances between the budgets were found to be immaterial, presenting two different proposed budget documents is concerning from a transparency perspective as members of the public rely on the proposed budget to make informed decisions.
• The proposed budget includes a tax levy of $23,574,645 which is $1,126,062 from exceeding the tax levy limit.

Key Recommendations

• Develop a plan to maintain fund balance at a reasonable level to ensure funds are available in case of unanticipated expenditures or a shortfall in revenues during the fiscal year.
• Review the amount of fund balance appropriated for the water fund and amend to the amount that is available. Review the estimate for sewer usage revenue and amend as necessary.
• Review the estimates for New York State Touring Route Program revenue and expenditures and amend as necessary. 
• Lower the estimate for the sale of metered water or pass a resolution to raise water rates prior to the adoption of the budget. 
• Review the estimate for police overtime and increase it to an appropriate level or implement changes in procedures to manage costs within budgeted amounts.
• Consider including a reasonable estimate for contingencies in the budget.
• Review the estimate for personnel services and amend as necessary.
• Consider establishing a reasonable estimate for a tax overlay in the budget.
• Ensure the budget presented to the public and posted to the City’s website are consistent.
• Adopt a budget that includes a tax levy no greater than the tax levy limit (tax cap) unless a local law is adopted to override the limit.