The city of Albany’s economy has been stabilized by state government and new industries, but is troubled by high poverty and a reduced tax base due to a large number of vacant and tax-exempt properties, according to a report issued today by State Comptroller Thomas P. DiNapoli. The report is part of DiNapoli’s fiscal stress initiative and is the latest in a series of fiscal profiles on municipalities across the state.

“Albany is the heart of New York state government. While the city reaps significant financial benefits from being the state capital, it also has a notably high percentage of tax-exempt properties,”said DiNapoli. “Government offices, hospitals, universities and the emerging high-tech sector are creating tremendous opportunities in Albany. But the city still faces many of the same challenges as its upstate counterparts –poverty, increased expenses and dwindling reserves. Thankfully, Mayor Sheehan has entered office with a clear understanding of the importance of sensible budgeting and developing a realistic long-term outlook of the city’s finances.”

“As the seat of state government and home to world class hospitals and institutions of higher learning, Albany has tremendous potential, but we also face significant challenges,”said Mayor Kathy Sheehan. “Since 2012, our fiscal situation has become dire. After finishing 2013 with a nearly $1 million deficit, we are expecting a deficit that exceeds $10 million in 2014. I want to thank Comptroller DiNapoli for shining a light on the challenges that Albany is facing. While Albany was not found to be fiscally stressed as of the 2012 data, since then, Albany’s financial situation has continued to decline because of its diminished tax base and decreased revenue among other factors. The Comptroller’s report highlights our city’s tax rates and debts already exceed the median for other cities. We will continue to work with our partners and stakeholders in finding innovative solutions to Albany’s fiscal challenges.”

DiNapoli’s report found a number of positive economic indicators. For example, the city’s unemployment rate of 7.2 percent was less than the statewide rate of 7.7 percent as of April 2013. Albany’s population, after declining 29 percent from 1950 through 2000, has increased slightly in the past decade and now stands at nearly 98,000. Also, the city’s median home value of $180,000 is higher than the statewide city median of $102,000.

These factors have helped the city increase its revenues over the past decade. From 2002 through 2012, the city’s revenues grew nearly 4 percent per year and by 45 percent overall. Albany collected $168 million in revenue in 2012.

The Comptroller’s report, however, noted several areas of caution for the city.

The city’s dependence on fund balance to close budget gaps should be closely monitored by officials. From 2008 to 2013, the city’s available fund balance declined from $19.8 million (12.6 percent of expenditures) to $5.6 million (3.3 percent of expenditures).
Also, the closure of the city’s landfill, expected in six or seven years, will result in a drop in general fund revenues and significant post-closure costs that city officials will need to address.

In addition, Albany has the sixth highest proportion of tax-exempt property among cities in New York. Currently, 59 percent of the city’s property is exempt from city and county taxes. More than half of the exempt property consists of state-owned property. While New York provides the city with payments for state-owned land in and around the Empire State Plaza, the amount decreased from approximately $23 million during state fiscal year 2011-12 to $15 million in the 2014-15 state fiscal year.

There are also several socio-economic factors that have trended in the wrong direction. Most notably, the city’s child poverty rate of 34 percent easily surpasses the statewide rate of 21 percent, resulting in a higher demand for social services. The city’s property vacancy rate (16.5 percent) is noticeably higher than the median city (10.5 percent). Also, only 40 percent of property in Albany is owner-occupied, compared to 50 percent for the median city in New York.

Among other findings in the Comptroller’s fiscal profile:

• Albany is one of 12 cities in the state that utilize the homestead tax option, which establishes separate tax rates for residential and non-residential property. In 2013, the city’s tax rate for residential property was 25 percent lower than for non-residential property;
• State aid accounts for 11.4 percent of the city’s revenues, compared to 18 percent for all cities;
• From 2008 to 2013, the city’s available fund balance declined from $19.8 million to $5.6 million;
• Debt per capita for the city ($1,370) closely mirrors that of the median city ($1,390); and
• In 2013, Albany had exhausted 38 percent of its Constitutional Tax Limit, less than the median city rate of 45 percent.

Previous fiscal profiles issued by DiNapoli’s office include: Binghamton, Buffalo, Colonie, Elmira, Gloversville, Middletown, Niagara Falls, Plattsburgh, Rochester, Rye, Salamanca, Syracuse, Utica, Watertown, White Plains and Yonkers.

The Comptroller’s fiscal stress initiative has included the creation of an ‘early warning’fiscal stress monitoring system for municipalities and school districts.

Based on financial information provided to DiNapoli’s office by local communities, the Comptroller’s system evaluates local governments on nine financial indicators and creates an overall fiscal stress score. Indicators include fund balance, cash-on-hand and patterns of operating deficits. The scores are used to classify a local community as being in “significant fiscal stress,”“moderate fiscal stress,”“susceptible to fiscal stress”or “no designation.”The system also evaluates communities relative to environmental stress factors such as population trends, poverty rates and property values.

To date, DiNapoli’s monitoring system has identified a total of 142 municipalities in some level of fiscal stress. This includes 16 counties, five cities, 18 towns, 16 villages and 87 school districts. The city of Albany is listed in the no designation category. However, the city has formally applied for assistance from the state’s Financial Restructuring Board for Local Governments.

For a copy of the Albany fiscal profile visit: http://www.osc.state.ny.us/localgov/pubs/fiscalprofiles/albany.pdf

For more detailed information about DiNapoli’s fiscal stress monitoring system and to view reports related to local government fiscal stress visit: http://www.osc.state.ny.us/localgov/fiscalmonitoring/index.htm

For access to state and local government spending and more than 50,000 state contracts, visit http://www.openbooknewyork.com/. The easy-to-use website was created by DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.