Auditor commends Schenectady on improved finances
SCHENECTADY Auditor Jim Cusack, who had harsh words for the Schenectady City Council a year ago, said Monday that he was finally pleased with the city’s financial condition.
His audit of the city’s 2012 spending found only minor problems, including old, uncashed checks collected for small fees.
Most importantly, he said, the city finally cut back on its expenses to live within its means.
Last year, he told the council that it would go “out of business” if it kept spending more than it brought in. The city was then on pace for a third consecutive year of deficits, which the city covered by spending its ever-decreasing savings.
When council members protested Cusack’s criticism, he told them bluntly that the end was in sight.
He said the city could only keep spending its savings for “another couple of years — at best.”
Then it would be all over.
A year later, the same man was smiling as he presented the 2012 audit.
“This is a very good start,” said Cusack, an independent auditor with Cusack and Co.
The city didn’t spend a cent of its savings — although the 2012 budget had included plans to spend $5.4 million of the savings.
And the city more than just tightened its belt. It brought in $3.6 million more than it spent, adding to the city’s savings.
“They’re heading in the right direction,” Cusack said. “I’m pleased with what I saw this year.”
But, he added, the city isn’t out of the woods yet.
“It’s just a start,” he said. “I’d like to see continued operating surplus, consistent surplus.”
Finance Commissioner Deborah DeGenova agreed.
“You should look at this as a good story but I want to stress caution,” she told the council. “It’s the beginning of a way to create long-term fiscal health. It is a beginning and I do caution you.”
The city collected far more of its taxes than it has in the past, which DeGenova attributed to the effort last year to foreclose on properties that were years behind on taxes. Many owners paid up to keep their property.
The city still hasn’t seen any revenue from selling foreclosed properties, but it did make money by selling two firetrucks, she added.
Now it has to sell off the houses it took in foreclosure, getting revenue from the sale and getting them into the hands of owners who will pay taxes.
DeGenova added that in future years, the city has to budget to spend less than it receives, to build up savings in case of an emergency.
In a comparison to household finances, she said a household would be wrong to plan to spend exactly as much as it brought in.
“You weren’t creating any savings for yourself. You weren’t giving yourself any soft landing if you fell,” she said.
The city now has a very soft cushion in an emergency. It has a $3.7 million “unassigned” savings account, which can be used to smooth cash flow or to pay for unexpected expenses.
That’s a welcome change from 2011, when the city had just $75,000 in cash after paying the county for all the taxes unpaid by property owners in Schenectady.
This year, the council plans not to pay the county.
DeGenova said she was happy with the emergency savings account. It’s 4.7 percent of the 2013 budget, and she said experts recommend a savings of about 5 percent of the budget.
But the city’s success came at a cost: the sewer, water and golf funds finished in the red last year.
That’s because of what DeGenova called an “oops.”
The City Council decided last year to collect about $2.7 million that it had loaned those funds in 2004.
At the time, Cusack said, the loans were intended to save the funds, which were badly in deficit. The city loaned money from the general fund to pay for two months of operations, which was enough to get them back on their feet. But the money was never repaid.
In 2011, when the City Council was desperately searching for additional revenue to balance the 2012 budget, it turned to that loan to make ends meet.
Cusack said it was legal, and reasonable, for the City Council to call in the loan last year.
“It was, once they felt confident the sewer fund could operate, the water fund could operate,” he said.
The only problem was that the City Council added the revenue to the general fund without subtracting it from the other funds. So those funds vastly overspent their budgets when they were asked to pay back the unbudgeted loan.
DeGenova said that was simply a mistake.
She noted that the funds all had ample savings accounts and could withstand the expense.
The water fund ended up $800,000 in the red and the sewer fund overspent by $700,000. The golf fund was $200,000 in the red.