It almost looks easy now.
For the third year in a row, the city’s finances are in the black, according to the audit released Monday by Cusack & Company. Every fund finished with a surplus. Even the Police Department, once a major overspender, has been reined in.
But city officials are still spending as if the city were in deficit. Even when they have the money for it, they’re not buying frills like new computers if the old ones still work.
“If we don’t need it, we live without it,” said Public Safety Commissioner Wayne Bennett. “And we live very well without it.”
That strategy has given Mayor Brian U. Stratton his third straight surplus. The city finished 2007 with $8.3 million left in the bank.
It’s an impressive achievement, particularly considering that prior to 2005, the last time every city fund was in the black was 1997. In 2004, when Stratton took office, the state comptroller’s office warned him that he would run out of money by mid-year if he didn’t make drastic cuts immediately. His administration brought the city out of deficit in less than two years.
This year’s surplus was partly due to conservative budgeting — Schenectady got $3.4 million more than expected in revenues, including a $1.2 million increase in state aid.
But city officials also cut $4.9 million in budgeted expenses. The biggest savings came in health insurance, where the city saved $2.6 million by making its own health insurance plan more attractive than the two pricey HMOs offered to city employees. Many more workers switched to the city plan last year when they were offered free wellness programs and annual exams, among other benefits, Finance Commissioner Ismat Alam said.
The rest of the savings came in pennies pinched in every department. The most notable: the police came in $111,000 under budget even though the department overspent its allotted overtime; also, the Fire Department finished with $115,000 left in the bank.
“There’s better planning, better management,” Stratton said when he announced the $8.3 million surplus. “This allows us to do many more things.”
TAX RELIEF
But don’t expect carefree spending now that the city is flush. Stratton is spending $6 million of the surplus, which sounds like a lot, but most of it is going to the tax relief program that gave residents a 1.2 percent tax cut this year.
That cut was actually funded by the 2007 surplus — by September of last year, it was clear the city would have at least a $2.1 million surplus, so Stratton put it into the 2008 budget for tax relief. Since the surplus turned out to be much larger than $2.1 million, he has now set aside another $2 million for 2009.
The rest of the surplus was spent much in the way that accountants recommend residents organize their savings. Stratton paid off the city’s biggest loan — a debt from 2004, when the city’s finances were in such poor shape that he agreed to an installment plan to pay off the annual retirement system bill — and put aside money for emergencies. The city now has $250,000 to dip into when an expensive nor’easter hits.
Stratton also set aside more money for a big project that the city will start soon: the construction of the $20.4 million Foster Avenue public works complex.
DEMOLITION SAVINGS
Only one new project will be funded with the surplus: Stratton’s “50 First” demolition program, which will fund the demolition of the 50 most-blighted buildings in the city.
But even there, Stratton has found a way to save money. Rather than hiring contractors to knock down each building one by one, he is putting out bids for 10 houses at once. That will save enough money that he expects to knock down 20 to 25 houses this year for $525,000, not $875,000.
The city had found that the average cost to demolish one house was $35,000. But contractors are willing to charge less for a larger project, and Stratton believes bids will come in at an average of $21,000 to $26,000 per house.
Stratton put the rest of the 2007 surplus — $2.3 million — into a rainy-day savings account. That account now has $5.8 million — which is still far less than Cusack & Co. wants to see.
They recommended that the city build an emergency savings account equal to at least 10 percent of its budget. So far, the city’s account is at 7.9 percent.
“I think with another good year you’ll be able to do that 10 percent,” Certified Public Accountant James Cusack said. “Coming from a deficit [in 2004], it’s remarkable you’ve been able to do it in a quick fashion.”
Stratton leaped on that, emphasizing that no one should plan to spend that money. City Council members have at times suggested using a small amount of the fund for various projects. Some residents have angrily said the city should use the entire fund to cut taxes.
Stratton presented the audit to Moody’s Investors Service on Monday as well, hoping the agency would upgrade the city’s credit rating. The city saved $70,000 last year on its bond-sale premiums because of its improved credit rating, which fell to junk bond status in 2002 before rising in the past three years.
Cusack said he thinks the city has a good chance at another rate increase.
“I’d like to believe they’ll get an increased rating,” he said. “They’ve done exactly what they said they’d do.”
Stratton said Moody’s seemed impressed, particularly by the fact that the city is paying off the 2004 retirement bill. That year was the only year in which the city did not pay the full bill immediately.
If the credit rating is increased by one step, it will finally reach the point it was at nine years ago, before collapsing finances left the city with the lowest credit rating in the state.
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