Gloversville talks amending fund balance allocation in proposed budget
GLOVERSVILLE — City officials on Tuesday discussed amending the fund balance allocation included in the proposed $18.06 million 2020 city budget before it is adopted next month to pay up front for planned capital project expenditures rather than borrowing.
Commissioner of Finance Tammie Weiterschan during her report to the Common Council on Tuesday reported that the city’s constitutional debt limit rose significantly after the city refinanced existing capital project bands to 10 year bonds with lower interest rates and overall reduced payments.
“We refinanced bands to bonds, and so our interest expense is not as high and our payments are not as high, which is a good thing,” Weiterschan said. “The problem with that, along with a couple of other bonds that paid off in 2019, is our Constitutional Debt Limit rose significantly up into the mid-95th percentile.”
The state restricts the amount of debt a local government or school district can incur by setting a constitutional debt limit. According to the state Comptroller’s Office, for cities “the debt limit is a percentage of the five-year average full valuation of taxable property within a municipality.”
Certain types of short term borrowing and debts issued related to sewer projects are excluded from the debt limit. In turn, certain types of debts carried by a city may be excluded from a municipality’s constitutional taxing limit that restricts the amount of revenue local governments may raise by taxing properties.
The constitutional tax limit for cities is set by multiplying the taxable real property of a municipality by 2 percent of the five year average full valuation of properties. This number is the maximum amount of real property tax that can be levied in any fiscal year before factoring in exclusions.
For fiscal year 2018, the city’s constitutional taxing limit was set at approximately $7.25 million. The city levied $7.66 million in property taxes of which approximately $6.37 million was subject to the limit, meaning the city exhausted 87.86 percent of its constitutional taxing limit.
Weiterschan noted that the city Finance Committee has been talking about borrowing for equipment purchases included in the 2019 capital plan that will ultimately be made in 2020, and suggested instead allocating a portion of the city’s fund balance into the 2020 operating budget to cover the purchases.
“Therefore we’re not borrowing the money and having it sit there when purchasing is sometimes slower than what we’d like, and it’s available as we need it and if we need it,” Weiterschan said, pointing to changing needs in the Department of Public Works over the course of the year from what was originally planned in the 2019 budget as an example.
“If we don’t borrow that money, and we just put it in our operating budget, it doesn’t tie our hands as much as if we were to borrow it and then need it for something else,” she continued. “With that constitutional tax limit, I think it’s more prudent for us to use the operating budget for those things.”
Weiterschan said she already discussed increasing the fund balance allocation to cover some equipment purchases in the 2020 proposed budget with Mayor Vincent DeSantis and Sixth Ward Councilman Wrandy Siarkowski, who sits on the Finance Committee. The 2020 proposed budget previously carried a fund balance allocation of $920,698.
The city’s fund balance totaled approximately $7 million at the beginning of 2019. The current year’s $18.91 million budget included a fund balance allocation of $1.65 million of which just under $1 million has been expended so far. In 2018 the city avoided expending any of the $1.18 million allocated in the $17.75 million budget due to sales tax revenues that exceeded the city’s anticipated revenue projections.
With no objections from the Common Council members on Tuesday, Weiterschan said she would discuss planned equipment purchases with department heads in a meeting on Monday to determine exact figures for those expenses before adjusting the budget and submitting the revised document to the council for review before its scheduled adoption during the Dec. 10 meeting.
The Common Council previously held a public hearing on the 2020 proposed budget during the Nov. 12 meeting, during which no members of the public spoke. The council will not conduct an additional hearing as there will be no change to the proposed budget’s $7.66 million tax levy that keeps taxes flat at the current year’s rate of $19.95 per $1,000 of assessed value.