Gloversville to borrow for improvements
GLOVERSVILLE — The Common Council this week authorized the city to borrow $678,000 for capital improvements to repair or upgrade aging city equipment, facilities and infrastructure. Officials say some projects that were originally planned for this year were tabled as the city cautiously guards its financial position after an initial drop in sales tax revenue during the second quarter of the year rebounded for a strong finish. As the city begins drafting the 2021 budget, this year’s finances remain uncertain as early sales tax collections for the third quarter show a decline in revenue from the previous year.
The Common Council on Tuesday approved a resolution authorizing serial bonds totaling $678,000 to be issued to the city to finance capital improvements. The borrowed funds will cover the estimated cost of reconstructing the roof of the Gloversville Police Department for $83,000, the purchase and installation of radio and communication equipment for the police department for $70,000 and for Gloversville Fire Department for $50,000, remodeling of original bathrooms at the fire department and reconfigurations of areas commonly accessed by the public for $75,000 and reconstruction and improvements to the city drainage system for $400,000.
Capital improvements planned for this year as part of the city’s five-year capital improvement budget were reviewed by the city Finance Committee in the spring as the city looked to trim costs amidst uncertainty over the financial impact of the coronavirus.
According to Mayor Vincent DeSantis, some planned projects that were not immediately necessary were indefinitely postponed following the committee review while some other priority projects were added.
“Some things were pulled off the table because of that scare we had at the beginning of the year, but a lot of things we realized were necessary and had to stay on and these things were necessary,” said DeSantis.
DeSantis pointed to plans to resurface the police department parking lot along with other interior and exterior improvements at an estimated cost of $160,000 as an example of a project that was tabled as it does not pose an immediate concern while the roof reconstruction project was added to address the hazard the roof currently poses from winter ice build-up.
“Resurfacing the parking lot at the police department is not a necessity, it’s not anything that is going to change quality of life of citizens and it is not a safety hazard. It would be nice, but it’s not something we’re doing,” said DeSantis. “The roof on City Hall on the south side of the building, ice builds up on the roof and falls in large amounts sometimes. That roof has to be reconfigured, so it doesn’t do that because it’s dangerous.”
The mayor noted that the capital projects the city decided to move forward with will be bonded for at currently low interest rates to be repaid over time. Operating expenses, on the other hand, must be paid out as they come up which led the city earlier this year to modify departmental budgets to reduce expenses.
That process was led by department heads who were asked to identify expenses that could be trimmed after the city began to experience a decline in sales tax revenue amidst the state stay at home order to slow the spread of the coronavirus.
After receiving only $389,302.72 in sales tax revenue during the first two months of the second quarter of the year, a $240,855.45 decline from collections in the same months in 2019, DeSantis estimated the city cut approximately $3 million in planned spending from the 2020 city budget. Those cuts included a combined total of $732,000 in reductions from the city’s three largest departments; the Department of Public Works, the Gloversville Police Department and the Gloversville Fire Department.
After making those cuts, city sales tax revenue ultimately rebounded during the final month of the second quarter as the city took in $572,925.16 in June to end the quarter with a total gain of $86,699.29 in revenue over collections from the second quarter of 2019.
Despite the strong finish for second quarter sales tax revenue, DeSantis said the city has no plans to restore any of the identified spending reductions amidst continued uncertainty over how the coronavirus will impact revenues through the end of the year.
City officials are hoping the initial decline followed by a steep gain for second quarter sales tax collections is a pattern that will be continued during the third quarter after revenues reported by the state Comptroller’s Office for July showed collections for the city at $255,243.62, down $83,451.97 from the same month in 2019.
Finance Commissioner Tammie Weiterschan said she will be watching for returns at the end of the third quarter running through September to get a true picture of city sales tax revenues, noting that sales tax collections for the first two months of each quarter are paid out based on estimated revenue projections calculated by the state that are reconciled at the end third month based on the actual revenues collected for the entire quarter.
Weiterschan acknowledged that the state’s system of projecting sales tax revenue to generate payments for two months before reconciling the returns at the end of the quarter after the third month from the actual revenue collected is a bit confusing, saying it gave the city a bit of a scare at the beginning of the second quarter before revenues were reconciled at the end of June.
“Our numbers were horrendous in the beginning,” said Weiterschan. “I think last quarter they withheld more because they anticipated revenues to be down more.”
A clear view of the city’s sales tax revenues for the second and third quarters of the year will be essential as the city attempts to project revenue for 2021 as budget planning for next year ramps up even as the financial landscape through the end of this year remains uncertain.
Weiterschan noted that the city is still waiting to hear if the state will act on plans to cut state aid to municipalities by 20 percent, which would reduce anticipated revenues budgeted for 2020 by approximately $460,000. The city typically receives state aid at the end of the year in December.
Looking ahead, the state has not issued guidance to municipalities on state aid planning for 2021 or recommendations surrounding how to project revenues for next year despite expectations that the coronavirus pandemic and therefore its potential to impact finances will continue for at least a portion of next year.
The city Finance Department typically projects revenues during the annual budget process based in part on performance from the previous three years and emerging trends. While drafting the 2021 budget this year, Weiterschan said there will be more focus on looking at the city’s performance during the second and third quarters of the current year while trying to anticipate potential impacts of the coronavirus.
“I’m hopeful for 2021 that it will be a better situation than where we are for 2020, but I wish there were some more guidance because it’s just a big unknown as to where this is going to end,” she added.
DeSantis, who is expected to release his draft 2021 city budget proposal during the next Common Council meeting on Sept. 22, acknowledged that planning for the next year’s budget is more challenging than in typical years and will require the city to more cautiously estimate revenues and expenditures due to the continued uncertainty the coronavirus has created.
“This is going to be an austerity budget, it’s going to be a budget where we’re going to have to tighten our belts a little more than we have for 2020 because we don’t know what the long-term effect of the coronavirus is going to be,” said DeSantis. “When you do the budget, you have to underestimate revenues a little bit and overestimate expenditures a little bit and hopefully you’re pleasantly surprised as you go through the year.”
DeSantis is still optimistic, noting that previous council administrations built up a healthy fund balance that the city can access to relieve stress if finances are more greatly impacted than anticipated by the coronavirus in the future or to supply a local match if grant opportunities that could drive economic development projects become available without draining the fund.
He went on to point out that the city’s finances have been less severely impacted by the coronavirus than other municipalities and the city is less dependent on industries that are still unable to operate or that have seen declining revenues as health safety concerns continue.
“There are things that happen in the world we have no control over, we always have to be ready for that, this is one of those times,” said DeSantis.
“I can remember doing an annual message to the council talking about how optimistic I am about the future of Gloversville and I remain optimistic,” he added.