AMSTERDAM -- The New York state Comptroller's Office has certified the city of Amsterdam's accumulated budget deficit to be $8.7 million by the end of the 2017-18 fiscal year, clearing the way for the city to borrow money to clear off its books and move forward with delayed capital projects.
Mayor Michael Cinquanti released an email to the news media Saturday explaining the results of a process that took several weeks of officials from the Comptroller's Office reviewing city's financial records to determine the size of the deficit. A letter received from the controller said the city was cleared to issue bonds of up to $8.3 million to pay off the debt.
"The city controller is now in the process of preparing the information necessary to go to market for those bonds," Cinquanti wrote. "Before we do that, we will review our bonding plan with both the state Comptroller’s Office and I will also be reaching out to financial advisers with the New York Conference of Mayors for their opinions of our debt restructuring strategy."
At this stage, Cinquanti said, it's not clear whom or what needs to be reimbursed. Cinquanti said Amsterdam will likely borrow the full $8.3 million it has been authorized to bond for, but it will be up to his administration to determine how much of the accumulated fund deficits must be paid off. Cinquanti said he isn't certain whether the city has to pay off the deficit for the city's transportation department, which was abolished in 2018.
"It will be the city's decision, but we will make sure the Comptroller's Office approves of our strategy," he said. "That transportation fund deficit, do we need to pay it off or no? I don't know, I'll tell you in two weeks. We're going to go through each of those funds to determine how much we need to pay back. We're going through the exercise of 'who do we owe this money to, who do we have to pay back?' If we owe it to ourselves, we may not pay it back. If we owe it to others, we have to pay it back."
The Comptroller's Office has ranked Amsterdam as the most fiscally stressed municipality in New York state. Local municipalities in the state are not allowed to borrow money to pay for budget deficits without a special law approving it. The city was approved by the state Legislature and Gov. Andrew Cuomo in 2019 to borrow up to $8.3 million to pay off its accumulated budget deficit, but the city had to first agree to accept oversight from the Comptroller's Office, including a requirement to file quarterly financial reports and to submit the city's annual budget for review prior to adopting it.
As a result of its confused finances, Amsterdam has been unable to borrow money to begin work on important capital projects, such as a planned reconstruction of Church Street.
Cinquanti noted the Comptroller's Office did not review the city's 2018-19 financial records, which are not yet complete. He said City Controller Matthew Agresta has told him the city was able to pay down its overall accumulated budget deficit during the 2018-19 budget to a figure below $8 million.
"We think it was lowered by 2019, so we're authorized to borrow the $8.3 million, which will give us the cash we need to take care of the deficit as it stands today," Cinquanti said.
The letter to Cinquanti from the state says auditors determined the size of the accumulated budget deficit by reviewing the city's 2018 independent audit report and "other information submitted by the city."
Amsterdam's deficit is the accumulated amount expenses have exceeded revenues over approximately the last 10 years. The comptroller's office provided this breakdown of the deficit by city fund:
• general fund deficit of $6.1 million
• transportation fund deficit of $1.3 million
• sewer fund deficit of $512,675
• recreation fund deficit of $763,844
In the brief letter, the Comptroller's Office offered a one sentence explanation for the cause of the deficits. "The deficits were primarily due to several years of poor budgeting practices," reads the letter.
City officials over the last several years have provided a more complex answer to how the city's finances deteriorated so badly.
According to city officials, over the past decade Amsterdam has paid its bills during a time in which expenses often exceeded budget projections and tax receipts by using a number of different methods, including transferring funds from its water account, which is legal when done properly, and from its sewer sanitation fund, which is not legal. It also used money the city borrowed for capital projects, a practice city officials now acknowledge was illegal.
The city's independent auditor, EFPR Group, has determined the Amsterdam used poor bookkeeping practices, including co-mingling tax revenues and user fees with borrowed money, which allowed the city to pay its bills using the improper revenues.