The city has finally paid its $3.64 million obligation to the Schenectady City School District.
The money is coming a year late, and the delay sent the school district into a financial tailspin. But at least the money finally came.
School board President Cathy Lewis said she worried the city would never pay it.
“I know cash flow has been difficult for the city,” she said. “It’s not that they were saying they didn’t have the obligation.”
But city officials did ask the state Legislature to free them from the burden of making the school district whole. Schenectady’s local representatives refused to carry the bill.
By law, the city must pay the school taxes for every property owner who does not pay up during the year. The city pays the school district and then goes after the property owner, first with hefty fees and later with the threat of foreclosure.
But in 2011, Mayor Gary McCarthy said the city no longer had the money to pay delinquent taxes in advance. He said the school district had to wait until the city collected the money.
The decision came as a shock to the school district, which had been counting on the money. The announcement came with no warning, after the district had set its budget.
Lewis wasn’t pleased.
When the mayor made the announcement, he said to her, “We’re doing this in a friendly manner.”
Lewis answered, “I have to be a bit skeptical about that.”
She attended many council meetings after that, saying she wanted to learn about the city’s financial footing so she could understand whether the district was ever going to be paid.
Lewis used to be on the council and worked extensively with the city budget during her tenure.
In October, the mayor released his proposed 2013 budget, which included a payment to the school district. But even then, Lewis had her doubts.
Until this week, she said, she was still not sure the payment would actually happen.
Then the 2012 audit was released. It showed the city had managed to cut expenses and increase revenues so that it finally lived within its means. The city even put aside $3.6 million for savings.
“After I saw the financial report I was more confident,” she said.
But she joked that she wanted to make sure the check cleared.
McCarthy said the delay was a one-time occurrence. The city plans to pay every year from now on, he said.
He said the city could not afford to pay earlier.
“We’re still not in what I would call great shape, but we’re on the planned path to recovery,” he said.
The delay could also lessen the financial burden of making up for unpaid taxes, he said.
In making the delayed payment, the city has repaid the school district for its 2010-11 delinquent taxes. Next year, the city will cover the unpaid taxes from 2011-12.
That means the city will always be paying for taxes that are several years old. By the time the bill comes due, many late taxpayers may have paid up, meaning the city will have to cover less of the bill on its own.
“We budget at 15 percent for the uncollectibility [rate]. There is a good chunk of that that is in the late payer category,” McCarthy said. “You do collect that.”
The rest is paid by the city.
Schenectady’s situation is unusual. In most counties in New York state, the county must make the school district whole when taxpayers don’t pay. In Schenectady, the city pays up for both the school district and the county.
The city voted to stop making the county whole, saving about $1.7 million a year. Instead, the city will pass on to the county any payments it receives from property owners as soon as it receives them. The county has sued the city over the issue. In response, the council set a public hearing on whether to give the county the authority to go after property owners who have not paid their county taxes.
On Wednesday, the rescheduled date of the City Council meeting, the council will hold the hearing at 7 p.m.