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Amsterdam moves closer to deficit financing

Amsterdam moves closer to deficit financing

City will borrow to pay off budget deficit
Amsterdam moves closer to deficit financing
Main Street in downtown Amsterdam is pictured March 21. The city needs to borrow money.
Photographer: Erica Miller

Editor's Note: An article in Friday's Daily Gazette incorrectly states the New York State Legislature passed bills enabling the city of Amsterdam to obtain deficit financing to borrow money to pay off its estimated $8.4 million general fund deficit.

Home rule deficit finance bills for Amsterdam were introduced into both houses of the New York state legislature Thursday, but cannot be voted upon until after a three-day waiting period. The city of Amsterdam Common Council approved a resolution requesting the home rule legislation Friday, another necessary step in the process.

Amsterdam Mayor Michael Villa said the request will be hand-delivered to the Legislature Friday.

AMSTERDAM -- Home rule deficit finance bills for Amsterdam were introduced into both houses of the New York state legislature Thursday night to enable the city of Amsterdam to borrow money to pay off its estimated $8.4 million general fund deficit. The legislation still requires the governor's signature for it to be approved.

The city's Common Council is scheduled to meet at 9:30 a.m. Friday to formally accept the legislation, which requires the state Comptroller's Office to certify the exact amount of the city's deficit before borrowing can occur.  

Mayor Michael Villa said Amsterdam needed the home rule legislation to get permission from the state to borrow money for the purpose of paying off its accumulated budget deficits.

"The state is not giving us this money, what the state is giving us is the ability to borrow," Villa said. 

Villa said he spent the last two days working with state Sen. George Amedore, R-Rotterdam, and Assemblyman Angelo Santabarbara, D-Amsterdam, to secure thelegislation. 

"I want to give kudos to both Angelo and George," Villa said. "This was really two days of back and forth trying to get this done. They've been great supporters of our city, and I really can't thank them enough," Villa said.

"We'll meet [Friday] pass the resolution, and we'll hand-deliver the documents that are required by the state at the Capitol, and then hopefully this city can move forward." 

Amsterdam has been dealing with a growing general fund deficit for approximately the last 10 years, which the city's independent auditing firm EFPR Group has estimated to be about $8.4 million after the 2017-18 city budget. 

The deficit is the accumulated gap between the city's general fund expenses and the amount of money collected in property taxes, sales taxes and other city fees to pay those expenses. General fund expenses include payroll and benefits for the city's Police and Fire departments, DPW and clerks, as well as elected city officials' salaries, benefits and other core expenses of the city. 

Over the past decade Amsterdam has paid its annual general budget deficit by transferring funds from its water account, which is legal when done properly, and from its sewer sanitation fund, as well as money the city either borrowed or was granted for capital projects it never completed. City officials now say that was not legal use of the money. 

The city also borrowed $2 million in the form of a tax anticipation note in 2018 in order to maintain liquidity, safeguarding against the possibility it might fail to have enough cash for its weekly payroll. The tax anticipation note was renewed for 2019. 

Audits of Amsterdam's past bookkeeping practices by both the state Comptroller's Office and the city's independent accounting firms have revealed improper bookkeeping practices for years, which make accounting for how the city paid its expenses either very difficult or in some instances impossible to determine accurately.

 The cause of the problem has been attributed by city leaders to chaos in the elected City Controller's Office, including turnover in leadership due to elections, a resignation and the death of former city controller Ronald Wierzbicki in 2012, as well as poor bookkeeping practices. 

Current City Controller Matt Agresta said Amsterdam in the past co-mingled funds inappropriately, keeping all of its cash in one account, a practice he ended after being elected in 2013. 

Deputy Mayor James Martuscello, a Democrat who represents the city's 5th Ward, said he hopes the council will unanimously approve the resolution accepting the state Legislature's deficit financing home rule measure Friday. He said Amsterdam will borrow the amount of money needed to pay off the accumulated deficit and pay back the funds it borrowed from inappropriately. 
Martuscello said money meant for capital projects but was spent on other costs "was misappropriated, so we have to make amends for it."

Villa said it remains to be seen how much money the city will borrow, when it will borrow the money, the terms of how it will be paid back and exactly what the city will do with the borrowed money. He said he believes the city will likely bond for a large amount of the deficit, and some of that borrowed money will be used to pay back money the city borrowed from its own internal funds, but he cautioned that many of those borrowings can not be accurately accounted for.

"There's no way to go back to 2010, 2011, 2012 or 2013. Wherever the deficits occurred, that you can verify, [will be paid back], but that's up to the comptroller to determine that. We don't even know what the actual number is," Villa said. 

Alderman David Dybas, 4th Ward, said he wants to see what the city's five-year fiscal plan will be before he votes to approve the deficit financing. He said he has been requesting since January a list of the city's completed and uncompleted capital projects  so he can have an idea of what funds were misused. He said the city charter requires the council be provided with a capital projects list, but Villa's administration has not complied with his request.

Dybas said Amsterdam currently has about $26 million in debt, which combined with another $8 million in deficit financing will bring the city to approximately $34 million in debt.

"To my knowledge, the only way to pay off debt is to take in more revenue than you spend," he said. "If we have to pay that $34 million over 30 years, how much money is that going to be? At what interest rate? How are we going to do this? I hate to say this, but what is the lesser of two evils, this, or the state coming in and really clamping down on us? I don't know." 

Villa said the city will have a five-year plan to pay off as much of the deficit as possible, but will likely need more than 10 years and multiple borrowings to clear off the entire amount. 

Martuscello said he supported the city's $33.1 million, 2019-20 budget, which included a 7 percent tax levy hike and double digit sewer and sanitation fee hikes, because it included $300,000 to pay down the city's deficit. He said in the past the City Council, including himself, made a mistake by not raising taxes higher to bring down the deficit.

"We need to bring it down a little bit each year," he said. 

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