Stack of chips gone, but McCarthy can't stop rolling dice
Schenectady taxpayers shouldn’t be heaving a sigh of relief over Mayor Gary McCarthy’s budget proposal, which would raise taxes far less than most observers were expecting. The reason was touched on briefly at Monday’s City Council meeting by Councilman Carl Erikson.
The issue is McCarthy’s decision to pay only a portion of the city’s pension obligation next year, instead borrowing $1.36 million from the state.
The full amount (representing roughly 4 percent on the tax rate), plus interest, will be due in anywhere from a few to 10 years, depending on how long a term the city chooses. The big problem is that it’s a recurring expense: Next year, when the city starts paying off the $1.36 million it borrowed to cover 2013, the state will bill it for (presumably) an even-larger amount for 2014. Ditto in 2014 for 2015, etc.
If the city were expecting a revenue windfall or a sharp drop in expenses in the near future, borrowing for such an expense might be defensible. McCarthy does project more revenue from more people paying their taxes, as well as back parking tickets, and the city selling off some foreclosed properties; but it probably won’t be enough to cover the $1.36 million right away. And with McCarthy’s budget proposal emptying the city’s $3.6 million “tax stabilization fund” — one of many pots of money squirreled away in good times — he’s likely to run into serious trouble next year, what with a $3.1 million structural deficit and no hats to pull new rabbits from.
The mayor, who had to have known this day would come but didn’t take appropriate steps to avoid it, is still gambling that the city’s fortunes will turn around soon; bravo for him and the rest of the city if they do. But if they don’t, the 4 percent tax hike he’s calling for next year will seem like child’s play compared to what he’ll need to balance future budgets.