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Fixing Our City’s Finances: Making Progress, Even in Tough Times

(Editor’s Note: Last week the Record Pilot reported on a review of the City of Glen Cove 2012 proposed budget done by the NYS Comptroller’s Office. Because the review was first made available close to press time, the mayor did not have an opportunity to share his comments on the review and his 2012 budget. This op-ed provides that opportunity.)

My first day as mayor, in 2006, I sent a letter to the NYS Comptroller requesting a comprehensive audit of our City’s finances. This audit was important since it:

1) Identified and documented the scope of the financial mess I had inherited.
2) Provided recommendations to correct structural issues that became part of the City’s budgeting methods and spending practices over the course of several years.
3) The October 2006 NYS Comptroller’s audit report also created a history that no one can rewrite. The facts are the facts.

Since 2006, I have made a $53 million positive impact to our City’s fiscal health. Steps include cuts in expenses, reduction of debt and new sources of non-taxpayer revenue. The recent review of the City’s proposed 2012 budget acknowledged the significant progress we have made:

“City officials have taken many positive steps over the past few years to address the City’s long-term structural budget problems. For example, they transferred the City’s sewer operations to Nassau County, saving millions of dollars in costs. A new financial management system was put in place with increased monitoring of expenditures by City officials. City officials have also stated that they plan to reduce the City’s debt load by issuing less new debt than they retire each year. In addition, the City has embarked on an ambitious waterfront development project and is trying to market surplus City-owned property in an effort to spur economic development.” ~ NYS Comptroller October 2011

By beginning immediately in 2006, the City has avoided a truly perilous financial position from 2008 through today. The Comptroller’s recent review highlights and acknowledges this fact, pointing out that the City now collects almost $900,000 less a year in Mortgage Recording Taxes than we did several years ago and that we receive less revenue from Sales Tax today than we did in 2007.

However, the Comptroller’s report did not reference several other contributing factors causing declines in revenues and increases in expenses, such as reductions in State Aid and the bulging expenses of the NYS pension and health care plans. These areas, outside our local control, have collectively contributed a greater than 1,000 percent negative swing between the 2006 and 2012 budgets ranging from a net revenue of almost $500,000 in 2006 to an estimated net expense of $4.5 million for 2012.

This $5 million swing is a net loss for items that the City has no control over. Despite these challenges, my team has worked hard to come up with solutions allowing us to reduce our deficit ($9 million or 62 percent less) and lower the City’s overall debt obligations ($15 million or 21 percent less) while still complying with Governor Cuomo’s new 2 percent property tax cap.

Termination Payments for Retiring Police Officers

The City anticipates six officers to retire in 2012 with a termination payout of approximately $1.8 million, an additional cost alone that would have put the city over the mandated 2 percent tax cap by more than 6 percent. The City has never previously borrowed for this type of expense and while the Comptroller’s office has expressed a preference for paying these termination expenses with operating funds, the option of borrowing for this purpose has been included at this time to allow us to spread the costs of this one-time expense out in a way that minimizes the impact on both our budget and the property tax levy we pay.

The City is negotiating with the PBA to pursue a variety of different options that could minimize or eliminate the bulk of this potential expense.

Funds for Tax Certiorari

The City understands that tax refund payments are operating expenses and has attempted to appropriate funds for tax certiorari since 2009. We believe this is the first administration in at least the last two decades that has successfully tried to appropriate funds for this expense. This year $360,000, more than 50 percent of what is anticipated will be needed, has been appropriated.

In the 2012 proposed budget the City’s debt payment is $750,000 LESS, a savings attributed to the fact that we have borrowed less money thereby reducing outstanding debt by $15 million. By borrowing less money each year since 2007, we have experienced the results of lower principal and interest payments in the City budget. This is one of the reasons that we have been able to appropriate $360,000 for the anticipated tax certiorari payments. While realizing that this will not cover the full cost of tax certiorari claims in 2012 and that the balance will need to be bonded, it is nonetheless a good start in building the appropriation to the necessary level to fund the full cost of these payments. Even with these tax cert borrowings, the City has reduced its reliance on debt and borrowing overall. In 2011 the City has reduced its debt by almost $4 million in a single calendar year.

Building Permits

2011 has shown a reversal in the recent trend of declining building permits in Glen Cove. Permit projections for 2011 are $250,000 based on actual revenue through September of almost $190,000. The city feels this amount will be maintained through 2012 based on permit applications currently in the building department and applications currently being reviewed by the Planning Board. In addition to the regular flow of permit applications in the department, the City has added several major developments that have received Planning Board approval and plan to commence construction in 2012, representing a total of an additional $170,000 dollars in permit fees in 2012 above the 2011 figure of $250,000, for a total of $420,000 next year – an increase of approximately 60 percent. We have provided documentation to the Comptroller’s office this week, which we expect the Comptroller’s office to acknowledge as conservative, reasonable and realistic.

My team and I have worked hard for the last six years to fix the financial problems we inherited when we took office, including dealing with some of the most turbulent fiscal times in our nation’s history. And we will continue to work hard to restore our City’s fiscal position to where it should be by retiring debt and deficits, increasing revenues and lowering expenses at every opportunity.