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May 22, 2013

DiNapoli: Poughkeepsie Facing Severe Fiscal Stress

Inaccurate budgeting has created an $11 million general fund deficit in the city of Poughkeepsie, according to an audit issued today by State Comptroller Thomas P. DiNapoli. The report also found the city’s debt burden has increased 45 percent over the past five years.

“Communities across New York are dealing with increased fiscal stress and Poughkeepsie is no different,” said DiNapoli. “But unrealistic budgeting has severely deteriorated Poughkeepsie’s financial condition. City officials have continued to overestimate revenue and under-budget for known expenditures. Ultimately, this may reduce the city’s ability to provide services to its residents and place a growing burden on property taxpayers. Officials must develop a long-term plan to get the city back on track.”

In 2010 and 2011, auditors found city officials over-estimated revenues by $3.2 million and under-budgeted appropriations by $4.7 million. This includes over-estimating payments in lieu of taxes ($381,000), rental payments ($305,000) and interest earnings ($426,000); as well as over-expending budget line items for health insurance ($944,000), accumulated sick pay and vacation pay ($750,000), and workers compensation ($415,000).

By failing to base their budgets on actual revenues and each prior year’s actual expenditures, city officials depleted the city’s general fund balance by $8 million in 2010 and 2011, and by a total of nearly $13 million from 2007 to 2011.

Audit findings also included:

  • Debt as a percentage of revenue (12.9 percent) is currently ranked 11th highest among cities in New York state;
  • The city’s total debt of $69.7 million represents $2,129 of debt per capita;
  • Long-term debt payments cost the city approximately $8.5 million annually; and
  • Poughkeepsie receives $129.77 of state revenue sharing aid per capita, compared to $146.80 for the median city in New York.

The report identifies a number of demographic challenges that have also contributed to Poughkeepsie’s poor fiscal position. The city’s poverty rate is 22.6 percent, far above the median city rate of 13.7 percent in New York. The unemployment rate of 8.2 percent is also higher than the statewide rate of 7.9 percent. Poughkeepsie must also cope with a relatively low home ownership rate. Currently, only 37.3 percent of the city’s housing units are owner-occupied (compared to the median of 49.5 percent statewide) and 11.3 percent of the housing units are vacant (versus the median of 9.2 percent statewide).

DiNapoli recommended the city develop a comprehensive plan to reduce the city’s outstanding long-term debt and take immediate steps to reduce the deficit in the general fund.

Additional recommendations for the city council include:

  • Require the mayor to prepare realistic budgets based on actual results;
  • Authorize all interfund loans prior to transfers occurring and ensure all interfund loans are repaid by the end of each fiscal year;
  • Require the mayor and city commissioner of finance to prepare periodic reports that would help assess the city’s fiscal condition;
  • Adopt financial policies pertaining to fund balance and interfund transfers; and
  • Require the city commissioner of finance to provide timely audited financial statements.

The response from city officials is included in the final audit report. The city council is required to prepare a plan of action that addresses DiNapoli’s recommendations within 90 days.

DiNapoli recently finalized an early warning monitoring system that will identify local governments facing significant fiscal stress and present a realistic picture of their financial condition and identify the economic and budgetary challenges they face. This system will make available an objective analysis to assist taxpayers in understanding and participating in local financial decision-making.

For a copy of the report visit: http://www.osc.state.ny.us/localgov/audits/cities/2013/poughkeepsie.pdf

For more detailed information about Comptroller DiNapoli’s fiscal stress monitoring system and to view reports related to local government fiscal stress visit:
www.osc.state.ny.us/localgov/fiscalmonitoring/index.htm

For access to state and local government spending and more than 60,000 state contracts, visit http://www.openbooknewyork.com/. The easy-to-use website was created by Comptroller DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.

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