Schenectady's finances in dire straits

PHOTOGRAPHER: Kathleen Moore

Just two weeks into the new year, the city’s financial plight is so dire that it may ask its unions for concessions, turn to layoffs or massively reorganize services, the mayor said.

“The numbers are what they are,” Mayor Brian U. Stratton said. “We need to plan for the worst-case scenario.”

With cutbacks likely in 2011 state aid, the city may have to fill a $7 million hole in next year’s budget, he said.

The state is only projected to cut $1.2 million and has delayed payments on another $1.2 million. But that hit, combined with the decision to spend $4.4 million of the city’s savings this year, will put Schenectady on uncertain ground next year.

“The fund balance is going away fast,” Stratton said, and for the first time, he acknowledged that there will not be $4.4 million left to use next year.

“That won’t be available, in all likelihood,” he said. “Hopefully, there will be some surplus to apply from the 2009 year, but that is not known [yet].”

Last fall, before the state aid cuts were publicly discussed, the council accepted Stratton’s plan to spend down the savings accounts. It also cut further to eliminate any tax increase for 2010.

Now that decision may have left the city in a tough position — cash flow has already become somewhat problematic.

Stratton said he’s considering delaying the 2010 pension payment due to the state because of reduced cash flow.

“We could maybe delay our pension payment to ease our cash flow in the first quarter,” he said, but he added that cash flow will be far more strained in the fourth quarter.

In the city’s worst years, it had to borrow money to get through the fourth quarter. One of Stratton’s accomplishments in his first term was to build enough savings to eliminate that expensive borrowing.

Stratton blamed the council, to some extent, for exacerbating the problem by rejecting his proposed 2010 tax hike. Instead, they whittled away $1.72 million to leave the tax rate unchanged, taking away a cushion that could have helped the city withstand the state aid delay.

But Councilman Mark Blanchfield, who is chairman of the finance committee, noted that it was Stratton’s idea to spent $4.4 million in savings. The council did not add to that amount.

Both Stratton and Blanchfield agree that the magnitude of the problem demands a major response.

“There may have to be some very big changes,” Blanchfield said. “Obviously we have to look very closely at even essential services, how we’re providing them and whether we’re proving them in the most cost-efficient manner.”

He’s also considering self-insurance, in which the city would stop paying premiums to MVP and CDPHP and instead pay an administrator to run health insurance. Already, the city is partially self-insured.

“This may be the time” to complete that process, Blanchfield said, noting that health insurance was one of the biggest increased costs in the 2010 budget.

He and Stratton said they want to avoid layoffs if possible but acknowledged that cutting staff would reduce health insurance costs.

Stratton said he first wants to ask the unions for concessions.

“Let’s not call them concessions. Additional cooperation, that’s a better term,” he said. “There are some additional cooperations we could achieve with our unions to help sustain our work force.”

He has already told his department heads to think twice before hiring anyone new or buying any supplies.

On Feb. 1 at 5:30 p.m., he will present “a range of options” to the council for cuts this year that could help prepare for 2011. If he can save millions this year, it will help fill that potential $7 million hole.

“We need to act now,” he said.