AMSTERDAM -- The state Legislature unanimously passed home rule legislation that would allow the city of Amsterdam to borrow money to pay off its estimated $8.4 million accumulated budget deficit.
The state Senate passed a bill sponsored by Sen. George Amedore, R-Rotterdam, Tuesday by 62-0 vote, and the Assembly passed the corresponding bill sponsored by Assemblyman Angelo Santabarbara, D-Rotterdam, by a vote of 104-0 Wednesday.
The bill still requires Gov. Andrew Cuomo's signature.
"We are pleased that both of our representatives understand the situation we are faced with and have guided and stood by us throughout this process," Mayor Michael Villa said.
Villa and the city Common Council voted unanimously to request the deficit finance legislation during a special meeting on Friday. Villa explained the city's need to borrow money.
"I think our options are extremely limited, and we took all of the steps leading up to this point to address this deficit, and, for me, this is the only option we really have," Villa told the council Friday.
Amsterdam has been dealing with a growing general fund deficit from at least 2008 until 2018, according to the city's independent auditing firm EFPR Group.
The deficit is the accumulated gap between the city's general fund expenses and the amount of revenue collected in property taxes, sales taxes and other city fees to pay those costs. 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 costs of the city.
Over the past decade Amsterdam has paid its annual general budget deficit by transferring money from its other funds, including its water fund, its sewer and sanitation funds, and from money borrowed or granted to the city for capital projects it never finished, a practice city officials now say was illegal.
Santabarbara released a statement Wednesday stating the deficit finance bill will help the city stabilize its finances help ensure the problem doesn't happen again.
"This type of financing has traditionally been authorized by the state Legislature for individual municipalities,” Santabarbara said. “Special provisions, reporting requirements and the oversight required by the state comptroller will help the city of Amsterdam avoid future fiscal and budgetary problems.”
The deficit finance bill passed by the Legislature will force Amsterdam officials to operate under greater scrutiny from the state Comptroller's Office.
The Comptroller's Office must first certify the amount of the city's deficit, which will determine how much the city is able to borrow.
Villa said at least several million dollars of the deficit accumulated under his term in office was caused by transfers from the city's water fund that were not accounted for properly, and should not count as part of the deficit.
He said if the water fund transfers had been done properly, as they will be in the future, his 2018-19 budget would have shown a surplus.
"Let’s wait and see what the comptroller comes in and identifies as what exactly the deficit is. Once he does that we will be able to determine what funds need to be paid back," Villa said. It remains to be seen how much it will cost long-term to borrow the money.
Amsterdam's deficit crisis has led to the city's credit rating being removed by the credit rating agency Moody's. The city's current debt, which is about $26 million, is rated at junk bond levels.
Alderman David Dybas, D-4th Ward, said he has many unanswered questions about how the city will finance its deficit.
"What are the consequences? Where do we get the money from? Is it the state? What is the interest rate?" he said.
The deficit finance bills proposed by Amedore and Santabarbara come with stipulations. The state will require the city to:
• Create three-year financial plans, in accordance with state regulations.
• The mayor and the city controller will be required to file quarterly financial reports to the members of the council and the state comptroller showing actual revenues and expenses within 30 days of the end of each financial quarter.
• The mayor will be required to submit the city's budget to the comptroller 30 days prior to the last date the city must adopt its budget. The comptroller will then submit recommendations to the Common Council no later than 10 days prior to the budget deadline, and the council will have five days to accept or reject the recommendations. The bill reads, "Any recommendations that the Common Council rejects shall be explained in writing to the state comptroller."
• The city will be required to tell the Comptroller's Office at least 15 days before borrowing any money or entering into any installment contracts. The comptroller can then issue comments on whether the city can afford the debt or costs.
• If the city fails to comply with these deficit finance rules, it will not be allowed to issue bonds for any other purpose until it complies.
Villa said the process will not be easy, but the city has no choice. He said he believes the city Controller Matt Agresta and Deputy Controller Cassandra Kinowski are prepared to handle the new reporting requirements from the comptroller.
"Matt provides a report at every council meeting, so I don't see an issue with data that needs to be provided to the state. We're automated enough to be able to do it," he said.
Some of the causes of Amsterdam's deficit have been attributed by city leaders to chaos in the elected city Controller's Office in past years, including turnover in leadership due to elections, a resignation and the death of former city controller Ronald Wierzbicki in 2012.
Agresta has said the improper transfer of money between Amsterdam's funds was enabled by poor bookkeeping, which included the city's practice of keeping capital projects money in the same account as its general fund revenues, making it nearly impossible to distinguish the original source of the money as it was being used to cover day-to-day expenses of the city.
Agresta, first elected in 2013, put an end to the city's past practice of co-mingling funds inappropriately.