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Amsterdam facing 10-12 percent tax hike to avoid state takeover

Amsterdam facing 10-12 percent tax hike to avoid state takeover

Consultant: City has run out of options
Amsterdam facing 10-12 percent tax hike to avoid state takeover
The Amsterdam Pedestrian Bridge over the Mohawk River is pictured.
Photographer: Courtesy of the NYS Canal Corp.

AMSTERDAM -- Municipal consultant Jeffrey Smith told the Common Council Tuesday night that they city must raise property taxes by 10 to 12 percent for the 2019-20 budget -- or face the possibility of a state takeover. 

In a document titled "The City of Amsterdam: The Fiscal Storm is Here," Smith, president of Canandaigua-based Municipal Solutions Inc., laid out a multi-part plan for the city to deal with its $8.347 million deficit and avoid a possible takeover by a state control board. 

"We've pulled so many rabbits out of the hat that the rabbits can't reproduce enough to produce more rabbits, so we're at the end. We're at the end. We've got to focus, but like I've said, we need a plan," Smith told the four members of the Common Council present at the meeting: Deputy Mayor James  Martuscello, D-5th Ward, David Dybas, D-4th Ward, Irene Collins, D-3rd Ward, and Paul Ochal, R-2nd Ward. First Ward Councilman Patrick Russo, a Republican, was not at the meeting.  

Mayor Michael Villa, who came to the meeting while it was in progress, agreed that the city will most likely have to raise taxes.

Smith said Amsterdam needs to borrow money to stabilize its financial situation, but the city's credit rating has fallen to junk bond status because of inadequate accounting practices going back to 2008. Smith said the city's accounting practices have improved under City Controller Matt Agresta to the point where the state Comptroller's Office should now be asked to certify the amount of the city's deficit, which could help the city avoid the "hellishly high" interest rates. 

"We have at least two underwriters that will work with the city, and they'll find you [bond] buyers, but right now we can't go out there right away and get slammed with [interest rates] that we'll have to live with for 10 years," he said. 

Amsterdam will also need to seek special home-rule legislation from the state Legislature to enable it to borrow the money necessary to stabilize its finances and move forward under it's own control.

Dybas asked Smith to define Amsterdam's fiscal problems. 

"Right now the problem is the historic over-estimating of revenues, under-estimate of expenditures, lack of command and control element in the city's finances because you had a reporting mechanism that was not built for a city; it was built for a much bigger, more complicated county," he said, referencing an old bookkeeping system no longer used by the city. 

Smith said Agresta and a new accounting system has helped the city square its books, but now the problem is closing the deficit. He said the city has been paying its bills using its water fund and from borrowing, and it will need more debt to fix the problem. 

But to get that debt under favorable terms it will need to obtain special "home-rule legislation" from the state Legislature to enable a long-term bond to cover the deficit. 

"This should be easier now, because everything is [controlled] by the Democrats now. It used to be that a bill would get introduced in the [state] Senate, and if you were a Democrat the Republicans wouldn't do it, just out of spite, and if you were Republican, the Democrats wouldn't do it out of spite, so those bills, we were always biting our nails about them going through. I do think with one-party rule, it will be easier as long as both your state Assemblyman and state Senator are on board," Smith said. 

Smith's statement conflicts with Amsterdam's current representation in the state Legislature. In the past, Amsterdam has benefited from having a majority member of both houses of the Legislature: Republican Sen. George Amedore and Democratic Assemblyman Angelo Santabarbara, but now they are represented in the minority of the Senate. 

Dybas asked Smith how high taxes will need to go to close the city's general fund deficit. Smith said at least 10 to 12 percent for the first year, and more after that. 

"Taxes are going to go up, there is no question about that. [The first increase] will buy you one year. That will send a message to the investment community that you guys are serious," he said, referring a strategy to obtain favorable interest rates from bond investors.

Martuscello said to raise taxes that high the Common Council will need to break the New York state tax cap, typically allowing about a 2-percent increase of a municipality's total property tax levy. To break the cap he said four out of five Common Council members will need to vote for the increase.

Smith said if the city doesn't stabilize its own finances, New York state could impose a control board as it has done in city's like Buffalo. 

"The control board would then dictate the city's finances, their budgets -- they can overturn labor agreements -- and the biggest thing is: The city has to pay for the control board, and the council loses control and it's an outside entity dictating to them," he said.

"There's a state where, if the city isn't making improvements somewhere along the line, a line will be crossed and they'll go to the control board. I know Buffalo has one, Nassau County has one, Erie County. Buffalo can't get rid of them, even though their bond rating has improved." 


 

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