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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 2025 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 $3.2 million of fund balance to close gaps in the budget decreases the fund balance that is available to cover unforeseen circumstances.
• The City should refrain from including the additional $1.5 million revenue and corresponding expenditures in its 2025 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 2025-26.
• The 2025 proposed budget includes sale of metered water revenue of $7.3 million and sewer usage revenue of $7.8 million. The City could potentially face a shortfall of $1.2 million in metered water revenue and $752,730 in sewer usage revenue if revenue estimates are not realized. 
• The City has budgeted $23.9 million for personnel services in the general fund. However, the City’s proposed budget includes a reduction of $3.7 million in the general fund for a “vacancy factor,” a budgeting technique used by the City to account for open personnel positions. 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 appropriations for personnel services are likely underestimated by as much as $3.7 million.
• Budgeted funding for police overtime of $748,605 is likely underestimated by at least $982,269.
• 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 2025.
• The proposed budget includes a tax levy of $24.5 million, which is $115,087 from exceeding the tax levy limit.

Key Recommendations

1. 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.
2. Review the estimates for New York State Touring Route Program revenue and expenditures and amend as necessary. 
3. Review the estimates for sale of metered water revenue and sewer usage revenue and amend as necessary.
4. Review the estimate for personnel services and amend as necessary.
5. Review the estimate for police overtime and increase it to an appropriate level or implement changes in procedures to manage costs within budgeted amounts.
6. Consider including a reasonable estimate for contingencies in the budget.
7. Consider establishing a reasonable estimate for a tax overlay in the budget.
8. 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.