The years of city tax cuts are over.
The mayor’s proposed 2009 budget proposes to raise taxes by 2.9 percent and increase the three biggest city fees while also offering raises to City Hall managers.
The average homeowner, in a house assessed at $80,000, would see a $67 increase in next year’s tax bill, most of it in fees. The tax increase itself would add $28, but the average homeowner would also pay $13 more for trash pickup, $11 more for water and $15 more for sewer service. The total bill would come to $2,393 before school and county taxes, which add roughly another $3,400.
For the first time in three years, no one applauded when Mayor Brian U. Stratton presented his $76.5 million budget proposal Monday. Instead, Schenectady City Council President Margaret King said she’d comb through the budget in search of items to cut.
“I would like to have had it at zero,” she said of the tax increase. “We will try to see if we can get it to zero, because I know the taxpayers are hurting.”
She said she would first look for ways to save money without laying off employees, but did not rule out the possibility of layoffs.
Councilwoman Barbara Blanchard said she was particularly concerned by the hike in fees. She proposed a recycling program to reduce the garbage fee, noting that the fee is going up because the city must pay more in fuel to truck its garbage across the state. Tipping fees at the landfills are also going up. Reducing the tonnage by encouraging recycling could save the city more money in the long run, Blanchard said.
The council gets the final say on the budget, but in recent years members have largely approved the mayor’s proposal. In October, they will meet with every department head to go over each piece of the budget and then hold a public hearing and vote on the final spending plan. The council members are not up for a raise in this budget, nor is the mayor.
AVOIDING A REPEAT
Stratton told the council that he could not find a responsible way to cut taxes or hold the line on city fees. The proposed budget already uses two-thirds of the city’s “rainy day fund,” leaving Schenectady with just a $2 million cushion. Using the rest to avoid the increase in taxes and fees would be a recipe for disaster, Stratton said.
“I’m afraid that otherwise we’ll wind up right back where we were in 2004,” Stratton said, referring to the deficit the city faced when he first took office. At that time, the city had so little cash that it ran out of money between tax collection periods. For years, the city ended up borrowing money at exorbitant rates to get through those lean months.
Stratton is determined to keep that from happening again.
“We have worked so hard,” he said. “Had everything stayed the same, we could realistically have come in with a very minimal and even no tax hike.”
But the city saw its budget increase by more than $1 million in fuel-related costs while losing about $850,000 in county and state grants.
Fuel has gone up 68 percent — from $670,000 to $1.1 million. Electricity and gas have gone up too, jumping 23 percent to a total of $2.3 million.
The price of chemicals has skyrocketed as well. In the water department, the chemicals used to treat the city’s drinking water have more than doubled to $260,000, leading to the water fee increase.
In the sewer department, the budget is projected to rise by more than 33 percent because four employees plan to retire and take buyouts for all their accumulated vacation and sick time. The city must pay those buyouts, but in the future, management won’t get that option. Every new managerial contract now includes a stipulation that sick time cannot be exchanged for cash and that all vacation time must be used or bought out by the end of each year.
“Use it or lose it,” Stratton said.
The new police contract also led to an increase in the police budget, which would grow from $14.7 million to $16 million next year.
The 4 percent raises handed out to the firefighters and police also hit the budget hard. The city’s Social Security and retirement payments went up $1 million to reflect the workers’ new salaries.
The workers compensation fund also jumped $450,000, a 45 percent increase, thanks to the city’s high injury rate. In response, Director of Administration John Paolino plans to roll out an injury-reduction program next year.
“I’m sure we will see the expense come down,” Paolino predicted, citing the effectiveness of a similar program instituted under his watch in Rotterdam.
Only one program has been cut in the mayor’s proposal. He eliminated the 50 First program, which he had announced earlier in the year. He had planned to use $500,000 in surplus to demolish 50 eyesores in the city.
“It’s sad. It’s going to have to be put on the shelf for the time being,” Stratton said. “We can still get there. We have to take a couple steps backward during this troubled time.”
The fund was used this year for two emergency demolitions — a house on Summit Avenue and the Brandywine School — but the $280,000 balance was transferred to the 2009 general fund.
He said the money was needed to keep other services available, including free swimming at the Hillhurst and Quackenbush pools. The state Department of Health warned the city that it would not allow either pool to open next summer without major repairs. The mayor added $65,000 to the budget for that work.
He also funded three new positions.
A senior community development assistant will work on the neighborhood comprehensive plans with a salary of $43,000, half of which will be paid through the Community Development Block Grant.
The law department will get a third attorney, and all three will tackle union labor issues rather than sending those to an outside law firm. The city will continue to hire outside counsel for firefighter and police contract negotiations.
The change is expected to save the city about $40,000, Paolino said, noting that outside counsel costs much more than a full-time city attorney.
Also, the city will hire a finance director, filling a long-time vacancy. Paolino had been assisting Finance Commissioner Ismat Alam on a consultant basis, but with his move to director of administration, she needs a new assistant, Paolino said. The new hire will receive a salary of less than $75,000.
In one of Paolino’s last acts as Alam’s assistant, he defended the 2009 budget as responsible and realistic, even though it uses most of the city’s unreserved savings — money set aside solely as a cash flow cushion.
“It’s more than we wanted,” Paolino said. “It’s more than you’ve ever spent before.”
The budget will use $4.1 million of the $6 million savings account. By way of comparison, the 2008 budget used $2 million of the savings.
Paolino argued that Stratton was using the savings for the right reason — to pay for expenses that will hopefully exist for just one year. When municipalities use their savings to pay for annual costs, they are essentially committing to using that level of savings every year, which can deplete the savings account and leave the municipality in crisis.
Paolino is betting that some of the new 2009 expenses will vanish by the end of the year. Fuel and electrical costs might eventually decrease. State and county aid may also return to their normal levels.
If none of that happens, Schenectady would have to make significant cuts or find millions in new revenues. The city would be in serious trouble, Paolino said — but so would everyone else.
“If these costs continue to soar and they become lifelong costs, no one would have fund balance to afford it,” Paolino said.