STATE COMPTROLLER’S FISCAL STRESS MONITORING SYSTEM WHILE HELPFUL, DOES NOT TELL THE WHOLE STORY, SAY LOCAL MAYORS
February 24, 2014 -- According to a recently released evaluation of the fiscal health of 535 village governments across New York State, which included the three villages in the North Shore area, Comptroller Thomas DiNapoli gave Sea Cliff and Roslyn Harbor marks indicating low levels of fiscal stress relative to other municipalities. Old Brookville was labeled a village facing "moderate fiscal stress," a designation, the Village’s mayor says, fails to take into consideration the extraordinary circumstances created by Super Storm Sandy.
Under the state's evaluation system, factors such as year-end fund balance, short-term debt issuances, and patterns of operating deficits were considered, with each category being assigned a particular weight value towards the final percentage score. Up to 29 points in total could be assigned, with a greater number representing a greater stress level.
Based on the evaluation, villages received one of four designations - "significant fiscal stress," moderate fiscal stress," "susceptible to fiscal stress," and "no designation." 16 villages state-wide fell into the first three categories, while the vast majority received no designation, and about 50, who had not filed their information with the state by the due date, were included in the report.
Both Sea Cliff and Roslyn Harbor received one point out of the possible 29, earning a stress level rating of 3.3%, and an overall label of "no designation."
Old Brookville received 17 of 29 points which translated into a rating of 59.6%, putting it at a "moderate stress level" along with three other villages state-wide. Five villages, including three on Long Island - Manorhaven, (on the Port Washington Peninsula), Bayville, and Islandia (a village included in a November report of municipalities whose fiscal year ends on Dececember 31) were designated as villages facing "significant fiscal stress" with ratings of 65.8%, 65.4%, and 67.5% respectively.
Old Brookville Mayor Bernie Ryba said that while he appreciates the Comptroller’s efforts in identifying fiscal stress in municipalities, the evaluation system does not make distinctions between “regularly recurring expenditures” and expenditures that result from “extraordinary circumstances."
Super Storm Sandy felled an enormous number of trees causing significant damage to the Village, he said, and required $717,797 to be expended for clean-up. He commended the job independent contractors McGowan and Son’s of Sea Cliff and Woody's Tree Service of Glen Cove did in the aftermath of the storm, making streets passable in a very short period of time, and cleaning up debris throughout the Village over a two week period.
To cover the costs of the unanticipated work, the village issued a $726,473 one year budget note, with an interest rate of 1.25%. It was not until July 10, 2013, after the May 31st end of the fiscal year, that the Village was reimbursed $643,317, (90% of the clean-up’s cost) by FEMA. “After the job they had done, it would have been unconscionable that the contractors not get paid while the Village waited many months to be reimbursed by the Federal Government,” he said.
The FEMA funds, he said, have been set aside so that the entire budget note, the terms of which preclude a pre-payment, will be paid off as planned this Thursday, February 27, 2014.
Mayor Ryba further explained that if municipalities are issuing debt to make payroll or meet other recurring costs, then that would be a problem that would need to be addressed, and for which the comptroller ought to issue a warning. However, taking on short term debt to address an extraordinary emergency, as in this case, was the appropriate and responsible thing to do, he asserted. The comptroller’s rating system does not distinguish between the two situations- an issue, he said, he had raised in discussions with Mr. DiNapoli's office.
"Hurricane Sandy was a once in a lifetime event," the Mayor continued. "The Village of Old Brookville has never issued short term debt to pay for regular recurring expenses nor does the Village expect to do so in the future."
Mr. Ryba also pointed out that the large one-time expenditure for clean-up work revealed one disadvantage of being a small village without a department of public works. Having to contract out all of the work created a sudden and very large one- time expense, he said, that villages with public works departments, although taking on overtime and some contracted costs, would not have to incur to such a degree.
In addition to the six points for the short term debt issuance, the rating system, which gives the most weight to maintaining a fund balance of more than 20% of the year's total expenditures (for which a municipality would receive 0 points), assigned Old Brookville five out of a possible eight points for maintaining a fund balance of 5.3%. In addition two points were assigned for having an operating deficit in both 2012 and 2013. Additional points were given for the village's cash ratio, and debt service as a percentage of revenue.
Subtracting the six points for the short-term debt issuance, Old Brookville would have received 11 out of 29 points, or 37.9% of the total number of possible points, which, according to the Comptroller's criteria, the Mayor said, would have resulted in "no designation" of fiscal stress for the Village.
With regard to Sea Cliff’s evaluation, Mayor Bruce Kennedy said that he is "proud that according to the comptroller's evaluation, Sea Cliff is one of the most financially responsible local governments in New York State." He did say, however, that the rating does not tell the whole story.
Commenting on the single point Sea Cliff Village was assigned, the Mayor said that it was because the Village had laid out about $500,000 from the fund balance for green upgrades to Village Hall for which the Village had been awarded a grant from the State. Although the Village eventually received the funds, they were not taken into consideration for the purpose of the Comptroller's fiscal evaluation, as the monies had not been received until after the fiscal year ended.
Despite the Village’s favorable rating, Mayor Kennedy said that "New York's local communities are facing significant financial and budgetary challenges. As Albany continues to shift the State’s economic obligations on to local governments and school districts, we are seeing chronic budget gaps." He added that Sea Cliff remains in strong financial shape, because the Village has "planned for potential fiscal stress," and exercised "tremendous fiscal prudence." He did warn however that "unless there are some major changes on the state level, all local governments will continue to be put in a precarious financial position."
According to the Comptroller's Office, villages in fiscal stress share a number of common characteristics. "Nearly all operate with both low fund balance and budget deficits. More than 40 percent have relied on short-term debt to bridge cash flow gaps," the report said.
This past November, ratings were released for towns, counties, and cities, and in January for school districts. The ratings for those in this area were as follows - Nassau County, 62.5% (Moderate fiscal stress), Town of Oyster Bay, 62.5% (Moderate fiscal stress); Town of North Hempstead, 38.3% (no designation); City of Glen Cove, 60% (Moderate fiscal stress); North Shore School District, 6.7% (no designation).
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The charts below can be found on the New York State Comptroller's Website. The top shows villages whose fiscal year ended May 31, 2013. The bottom chart shows municipalities (Counties, Towns, Cities, and Villages whose fiscal year ended December 31, 2012.