The Office of the State Comptroller has sent a letter to Glen Cove Mayor Ralph V. Suozzi and the City Council in reference to the city's current fiscal condition. The letter, dated Dec. 17, 2007, stated it was in regard to state laws which "authorized the city to issue debt...to liquidate accumulated deficits of $12.8 million in the general, water and sewer, debt service, recreation and self-insurance funds as of Dec 31, 2006."

The letter, signed by Deputy Comptroller Steven Hancox, acknowledged receipt of a letter from the City of Glen Cove dated Dec. 3, 2007 regarding the city's plan to issue $380,000 in Bond Anticipation Notes (BAN) to liquidate tax certiorari claims, as well as an indication that "on Nov. 29, 2007, the city issued $1,612,500 EFC Clean Water Statutory Installment Bonds through the State Environmental Facilities Corporation (EFC)."

The letter stated that on Oct. 1, 2007, the comptroller's office issued its audit of the city's proposed budget for the 2008 fiscal year, which indicated that the city would "likely end its 2006 fiscal year with a combined accumulated deficit of over $15 million, which exceeds the $12.8 million of deficit financing authorized by the State Legislature." In addition, the letter continued, the comptroller's office projected that the city's general fund may have an operating deficit of over $600,000 for 2007. "Given the city's continuing financial problems," Mr. Hancox's letter continued, "we have serious concerns about the city's borrowings. We do not believe that the city should take on significant new debt and its related expense, without first solving its underlying budgetary problems."

Comparing Glen Cove's debt affordability measures for the 2005 fiscal year with average measures of cities statewide, excluding Buffalo, Rochester, Syracuse, Yonkers and New York City, the letter stated that in two of four criteria, Glen Cove ratios "significantly exceeded the average of the other New York State cities," adding, "the city's debt service costs as a percentage of revenue were approximately 16 percent, while the statewide average was only about 8 percent." Currently, stated Mr. Hancox's letter, Glen Cove's outstanding debt per capita of $2,101 was also almost twice that of other cities and "the burden of debt service costs on city finances is concerning," adding that the comptroller's office believes that "the additional debt issued and planned to be issued by the city will likely further increase these measures." The letter recognized that the city's debt service costs are in part driven by the city's debt retirement policy.

While the measures for the city's long-term outstanding debt did not exceed the statewide average, the letter continued, the comptroller's office believes this to be a result of Glen Cove's increasing property values, rather than a decrease in long-term debt. "While the city's long-term outstanding debt steadily increased from $45.3 million to $56 million from 2000 to 2005," the deputy controller's letter continued, "its property value has increased dramatically over the same period, from $2 billion in 2000 to $3.6 billion in 2005. The city's $12.8 million deficit financing, ... the $1.6 EFC bond and the ... $380,000 in BANs for tax certioraris will increase its long-term debt to about $70 million."

The comptroller's office said it "strongly recommend[s] that city officials reconsider funding tax certioraris claims with debt proceeds," adding that said practice "saddles future taxpayers with the additional cost of debt issued to refund prior years' real property taxes."

In conclusion of its letter, the state comptroller's office admonished the city for not complying with the law requiring the city's chief fiscal officer, City Controller Sal Lombardi, to notify the state "prior to the issuance of any bonds or notes or entering into any installment purchase contract. The city issued the $1.6 million in EFC Bonds on Nov. 29, 2007, and did not notify us until after the issuance," said the letter. When reached for comment, Mayor Suozzi explained that the city was under a court order at the time to make payment to the EPA within 30 days for the EFC bonds. "It was a very restrictive time frame," he said. Mr. Lombardi added that as this was the first time the city was working under "the umbrella of deficit financing regulations," and as new regulations were just being put into place, the required timing of the payments "slipped between the cracks." Neither the mayor nor the city controller expects the problem to be repeated, they said.

The letter went on to recommend that city officials monitor and update multi-year financial plans and other financial information to help ensure that the city's fiscal health improves and also that the city adheres to the laws requiring notification to the state at least 15 days prior to the issuance of any bonds or notes, or entering into any installment purchase contract. Such monitoring should allow city officials to promptly identify any necessary corrective action in the event of unanticipated financial problems, wrote Mr. Hancox.

As to the certiorari payments, the mayor said that the city is currently paying the smallest amount of certioraris it ever has and with that trend continuing, the city will have smaller payments as it goes forward.

Mayor Suozzi stated he is happy to be working with the state comptroller's office as a partner in capital borrowing, and that its scrutiny will only help Glen Cove.