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Purpose 

The purpose of our budget review was to provide an independent evaluation of the City’s proposed budget for 2025.

Background

Chapter 56 of the Laws of 2024, Part DD (the City of Dunkirk Fiscal Recovery Act; “Act” authorizes the City of Dunkirk (City) to issue debt not to exceed $18.5 million to liquidate the accumulated (actual) deficits in the general fund, water fund, sewer fund and capital projects fund existing at the close of its 2024 fiscal year. During the effective period of the Act, the Fiscal Affairs Officer must submit the proposed budget for the next succeeding fiscal year to the State Comptroller no later than 30 days before the date scheduled for the City Council’s vote on the adoption of the final budget or the last date on which the budget may be finally adopted, whichever is earlier.

Key Findings

• The lack of complete, accurate, and current accounting and financial records significantly limited our review and precluded us from determining the reasonableness of all of the City’s significant revenue and expenditure projections. The City’s most recent Annual Financial Report was submitted to the Office of the State Comptroller for the 2021 fiscal year. The most recent available independent audited financial statements were for 2022. 
• As of December 31, 2022, unassigned fund balance in the general, water, wastewater, refuse and boardwalk funds were ($6,827,480), ($1,163,085), ($247,482), $0 and $0; respectively. The Mayor anticipates that the City’s reported operating results in the 2023 audited financial statements will be significantly worse than the deficits in 2022 and officials are also projecting deficits in 2024. 
• The 2025 proposed budget includes a planned deficit in water, wastewater and boardwalk funds which will further negatively impact the City’s overall financial condition and exacerbate cash flow issues. 
• The City’s known outstanding liabilities totaled more than $20.5 million: a $12.7 million revenue anticipation note (RAN) due in July 2025 plus interest of $952,196; $4.3 million past due to the New York State and Local Retirement System (NYSLRS), $1.75 million for two pumper trucks and $795,000 owed to the Dunkirk City School District for taxes collected and not remitted, as required. The 2025 proposed budget does not provide for satisfying these obligations. These liabilities exceed the $18.5 million maximum amount authorized by the State Legislature pursuant to the Act.

Key Recommendations

1. Adopt structurally balanced budgets that include realistic estimates and fund recurring expenditures with recurring revenues.
2. Make updating and correcting the City’s accounting records a priority and ensure records are updated as soon as possible so the Council has appropriate financial information to monitor the City’s finances and make informed decisions.
3. Review the proposed estimates for revenues and expenditures and amend as necessary.
4. Closely monitor revenues and expenditures and make timely and properly authorized adjustments to the budget as needed throughout the year.