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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 2024-25 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

Certain significant revenue and expenditure projections in the proposed budget are unreasonable. Furthermore, officials’ continued practice of using debt to pay for recurring costs is imprudent. Our review determined the City’s proposed budget:

• Continues to rely on $87.9 million in nonrecurring revenue, such as appropriated fund balance, one-time State funding and sale of property, to finance its operations. 
• Includes revenue estimates for temporary municipal assistance, police, real estate transfer tax, city and state mortgage tax, housing and buildings, parking violation bureau, hotel room and occupancy tax, metered water sales and sewer rents that may not be achievable.
• Results in additional debt and interest costs because the cost of tax certiorari claims are bonded instead of being financed through the operating budget. 
• Includes appropriations for police overtime, life/health/dental insurance, employee retirement, firefighting overtime and social security that are likely underestimated. 
• Does not include an appropriation for contractual settlements. Six of the City’s eight union collective bargaining agreements (CBAs) have expired or will expire soon. The City could face additional expenditures when these contracts are settled.
• Does not include a contingency appropriation, which limits flexibility to cover any unanticipated expenditures or revenue shortfalls.
• Includes $100.8 million to service its debt obligations during 2024-25. This amount represents about 6.9 percent of the City’s annual budget.
• Includes a $58.8 million capital budget. The City has included approximately $10.1 million in operating costs for items such as $5.4 million in textbooks, software and equipment in the Yonkers Public School District’s budget. The remaining $4.7 million in operating costs are for purchases such as vehicles, software and equipment for City departments which are a recurring expenditure and should be an appropriation in the annual budget. The City will incur additional costs if it continues to borrow for operating costs. 
• Includes a tax levy of $442,718,221.

The City’s proposed budget also includes the Yonkers Public School District’s (District’s) budget. Our review determined the District’s proposed budget:

• Is structurally unbalanced with a budget gap of at least $61.9 million.
• Relies on $12 million of additional State aid for services and expenses, which may not be available in future years.
• Does not include a specific appropriation for contractual settlements. Two of the District’s CBAs expired June 30, 2023. The District could face additional expenditures when these contracts are settled.
• Likely underestimates teacher retirement payments by approximately $478,000 and charter school tuition payments by approximately $206,000.
• Includes $5.7 million for contingency; this amount is less than 1 percent of the District’s budgeted appropriations. This amount may exhaust the current amount budgeted, limiting flexibility to cover any other unforeseen or unexpected costs.

Key Recommendations

• Develop a plan to maintain fund balance at a reasonable level and discontinue the practice of relying on one-time revenues to finance recurring expenditures. 
• Review the estimates for temporary municipal assistance, police, real estate transfer tax, city and state mortgage tax, housing and buildings, parking violation bureau, hotel room and occupancy tax, metered water sales and sewer rents and amend as necessary. 
• Consider adjusting the appropriation for tax certiorari payments and provide a financing source for tax certiorari settlements.
• Review appropriations for police overtime, life/health/dental insurance, employee retirement, firefighting overtime and social security and amend as necessary.
• Review the estimate for the City’s contractual settlements, and the potential need for the District’s contractual settlements and amend as necessary.
• Review the outstanding debt and review alternatives to borrowing.
• Consider identifying alternatives to borrowing funds for operating costs such as vehicles, software and equipment.
  Eliminate the $61.9 million gap in the District’s budget request. 
• Review the estimates for teacher retirement payments and charter school tuition payments. and amend as necessary.
• Review the estimates for the contingency appropriations and amend as necessary.