Mayor Gary McCarthy vetoed the city’s 2013 budget because it doesn’t set aside enough money to replenish the city’s savings, he said.
The final version of the 2013 budget cut more than $1 million in items that council members described as unnecessary padding. Councilman Vince Riggi suggested the mayor’s proposed budget had been deceptively padded so that the city would end up with a large surplus next year.
Other City Council members said the increases might have been honest mistakes. They took out most of the excess so they could offer a lower tax rate. The budget they approved raises taxes by 1.7 percent; McCarthy had proposed a 4.1 percent tax increase.
After vetoing the council’s budget, McCarthy said the city must raise taxes further to create a larger cushion for city finances. Otherwise, he said, Moody’s Investors Service will lower the city’s credit rating to junk bond status early next year.
“You need something to show them,” he said, explaining that Moody’s wants the city to have a large savings account. “They look at the fund balances.”
The council’s cuts to the budget won’t look good to Moody’s, he said.
“The way they’ve outlined [the budget], it pretty much guarantees us a downgrade in April,” he said.
Moody’s plans to return in April to judge the city’s financial health, and McCarthy was hoping to have an impressive balance in the city’s savings account by then.
He said the sale of properties taken by the city in tax foreclosures will help — but not until the end of the year. He said he could instead auction off the houses the city took, but that would devastate the city’s new plan to bring every house up to code in a partnership with local contractors, and then sell them to owner-occupants to improve the city’s residential base.
An auction would be quicker, but he doesn’t want to give up on the plan that just began this fall.
“It would give us enough cash, but I just believe that’s the wrong way to do it, and it doesn’t get us where we want to be,” he said.
The City Council supported the mayor’s housing plan in the budget and did not change the financial items related to it.
However, McCarthy objected to a decision the council made regarding some of the expenses it cut.
The council used half the cuts to reduce the tax rate. Money saved from the other cuts was placed in two savings accounts, which would be used to reduce debt and reduce the 2014 tax rate.
McCarthy said the wording on those accounts might make it impossible for the city to use the funds for cash flow. The city is low on cash, averaging about $75,000 after wiping out most of its savings account to pay county taxes that Schenectady property owners had not paid. The city makes the county whole on taxes, although the council is planning to stop that process this year.
McCarthy said he wanted the wording on those funds changed so the money can be used for cash flow.
He said he expects to come to an agreement with the council during tonight’s council meeting.
“I don’t believe we’re that far apart, so I don’t believe there’s a big fight,” he said.
The Democrats on the council held a closed-door caucus meeting Monday night to discuss the veto and whether they should override it. They did not allow the press, the public, or Councilman Vince Riggi to attend the meeting. Riggi is registered as independent. The Democrats did the same thing when writing the final version of the 2013 budget, the night before their public vote on it.
Riggi said he was “disappointed” that the council has begun to use caucuses to debate issues without his presence.
“Talking about public funds! Where do they think it’s OK to do this? Even though they do have that legal loophole, it’s really sad. I’m so disappointed,” he said.
Legally, the Open Meetings Law allows members of one party to meet behind closed doors to discuss matters of public policy. But a caucus can only meet if the governing body includes at least one elected representative from a different political party. Legally, that representative cannot be present at the caucus.
Council members are not allowed to vote in caucus, but they can agree on how they will vote.