The town faces a $14 million deficit, much worse than originally projected, Town Supervisor Paula Mahan announced Wednesday.
Mahan called it a “financial crisis” and said while layoffs are not planned, they have not been ruled out, and a freeze on all nonessential spending will remain in place for the near future.
“We are working very hard every day, we certainly don’t want to lay anyone off. We are in the process of putting ideas together for a long-term strategic financial plan. We hope we don’t have to go down the path of layoffs,” Mahan said.
Four separate reports done by an outside auditor and financial adviser hired under the former administration, as well as reviews done by Mahan’s transition team and the town comptroller, agreed on the $14 million figure, though Mahan said the actual deficit may now be higher.
Auditors looked only to Dec. 31, 2006. The town doesn’t have an estimate for 2007. “If it follows the pattern, the deficit could be higher,” said Mahan. “We have no idea how much higher. We’re trying to deal with the $14 million number now.”
Mahan, who defeated longtime Republican incumbent Mary Brizzell in November, also said Wednesday the town has a $10 million problem with the cash flow needed to cover operating costs. “We are in tough financial shape,” she said.
What auditors found points to “overspending across the board” and not in one area or department, according to Mahan. Several factors caused the deficit, including the way the accounting was reported; the style of reporting; and a cumbersome accounting system that was difficult to follow.
The grim news about the town’s finances first emerged when Moody’s Investor Service issued a report in 2007 that said the town had a deficit of $8.5 million.
Brizzell, who was then running for re-election, and other administrators said at the time it was misleading and the town was using tighter rules for municipal spending which accounted for the figure.
But Mahan, who held a news conference at Town Hall on Wednesday, said the problem with town finances dates back at least six years.
She said that in 2002 the town had a $12.5 million surplus.
In mid-January, shortly after she took office, Mahan ordered a freeze on nonessential spending and she said the town is trying to operate with less staff through attrition.
“We are trying to work with less and do more. We will be able hold out like this for a while. There was a lot of shifting, and borrowing of money, which created high interest rates and costs, which add up.”
Town officials failed to maintain the town’s financial health with internal controls and a system of checks and balances, which led to the deficit, Mahan said.
“I am very disappointed in what I was left,” she said, adding that it was a very sad day for the town.
Mahan, the first Democrat to win office in decades, said her administration inherited the deficit and now must correct it. “I pledged I would address this and keep it transparent and I have every intention of updating people as we go along.”
Public workshop sessions will be held in several different locations in town to inform the public about the deficit.
She expects the spending freeze on all nonessentials will last several months, until everything is reviewed and analyzed — including a state audit.
The state Comptroller’s Office is conducing an audit of the town’s finances and a separate audit into a controversial town paving project at the West Albany Rod and Gun Club.
A spokesman for the comptroller said Wednesday both audits are still ongoing and he could not comment on them.
The town has an operating budget of $80 million and employs about 800 people.
More from The Daily Gazette: