SCHENECTADY — City Hall is asking the City Council to approve a tax anticipation note that will allow the city to borrow up to $7 million to cover payroll costs and other city functions.
City Finance Commissioner Anthony Ferrari said securing the note would allow the city to avoid any cash flow problems for the rest of the year and into 2021.
The plan is to use uncollected taxes as collateral and pay off the note over a five-year period.
As of July 31, the city is owed $29 million in uncollected taxes, Ferrari said.
The ongoing coronarvirus pandemic has battered the economy. Local governments are not immune and have taken a hit from the loss of projected revenue.
The city faces a $12 million deficit in an $89 million budget, Ferrari told the City Council’s Finance Committee on Monday, which approved the request.
The City Council will vote next week on its approval.
Without a federal relief bill for local governments, Mayor Gary McCarthy has said layoffs would be inevitable, including deep cutbacks to city Police and Fire departments.
While not preferable, borrowing is an “overly cautious” approach that will help stave off cutbacks and allow the city maintain services, he said.
Doing so, however, will result in a “generally weaker financial situation” for the city, he said.
“If we got the federal assistance, we wouldn’t borrow the money,” McCarthy said, who added he remained “optimistic” that the U.S. Senate will reach a deal.
Gov. Andrew Cuomo, who took over the chairmanship of the National Governors Association on Wednesday, renewed calls for $500 billion in federal aid to state governments over three years.
Without aid, hospitals, schools and local governments will face 20 percent funding cuts, the governor said.
Unlike the city of Albany, which began announcing layoffs in early May, the city hasn’t slashed staff, but issued a hiring freeze.
That means an open position in the city Corporation Counsel’s Office has been left unfilled, leaving the department with just two attorneys.
“It has created some staffing issues,” McCarthy said.
The office is typically a revenue generator for the city, McCarthy said, by foreclosing on and selling distressed properties.