Wednesday, April 22, 2020

News from the Finance Committee

When the live stream of last night's Finance Committee meeting began, city treasurer Heather Campbell was in the middle of presenting her list of city revenue sources that would be negatively impacted by the coronavirus pandemic. The first thing I heard was her prediction that a deficit in sales tax revenue would likely continue into 2021. (The city budget for 2020 anticipated $1.9 million from sales tax.) Other areas negatively impacted were parking meters and parking tickets (the mayor waived all parking fees and parking tickets on March 16), lodging tax, mortgage tax, and building permits. Campbell reported that revenues for the first quarter were "down across the board." She told the committee, "In the next couple months, we'll have a better idea." The fact that the shutdown was only in effect for two weeks during the first quarter suggests the severity of the problem. 

On the expenditure side, Campbell noted that most of the City's expenditures were fixed obligations. Fifty percent of the budget is "directly related to personnel," and the City is continuing to pay all employees "whether they show up for work or not."

Eileen Halloran (Fifth Ward), who used to be the city treasurer and is a member of the Finance Committee, asked, "Is it too soon to ask department heads, if they had to cut, what they could do?" She went on to suggest, "We could require departments to produce an estimate." Jane Trombley (First Ward), who was part of the meeting but is not a member of the committee, suggested the departments might be asked what they could do to reduce their budgets by 10 percent and then 20 percent. Rebecca Wolff (First Ward) expressed the opinion that the Youth Department "should not be subject to the same kind of cuts." She argued, "The Youth Department is already understaffed and carrying a huge burden," referring presumably to the food distribution program the Youth Department has undertaken with the support of Friends of Hudson Youth.  

Among other things of interest:
  • In 2019, the City received the $100,000 meant for a truck study. To Gossips' knowledge, no plans have been made to design or conduct that study. Obviously, now is not the time to do so.
  • The City has the $200,000 from Stewart's to make improvements to the intersection of Green Street and Fairview Avenue. There seems to be no plan for how to proceed in designing the intersection improvements or to execute them, and it is not clear who is responsible for pursuing this.
  • The City's unassigned fund balance has gone from 26.8 percent 25.8 percent of the annual budget. The requirement that the City has imposed on itself is that the unassigned fund balance can never be less than 25 percent of the total city budget. Last night, Council president Tom DePietro asserted, "The reason we have a fund balance is for just this kind of emergency."  
Just before the meeting was adjourned, DePietro said he'd recently read an article that predicted it was possible that, when things started opening up again, "local tourism will have a huge boost." Interesting that tourism, which many once seemed to consider a dirty word, is now being looked to as our possible salvation.


  1. The fund balance is not cash -- and how the leadership of the Council can't grasp this is beyond me. To begin with, at $25.8m, the balance is roughly 2x the annual budget, not 25% of it. And it's not cash -- it's the liquidation value of the City's assets and, since the City isn't about to go out of existence (just bankrupt), there's really no value to this figure in terms of budgetary planning.

    What's most apparent from both this meeting and the formal CC meeting that followed, is that the Council is bereft of ideas, has no idea what its responsibilities are (hint re: the Stewart's money -- Fairview Ave is a state route . . . maybe speak to DOT district 3 in Kingston as they have responsibility for this area), and is relying on articles that "predict" something may be "possible." Well, anything's possible -- so maybe the Council will get down to business sometime soon and begin working on alternative means of revenue.

    Guess that short-term rental moratorium isn't looking too good right about now.

  2. It has been a long time since I agreed with John Friedman about anything, but after "attending" last night's formal CC meeting, "bereft of ideas" with "no idea what its responsibilities are" is pretty apt.

  3. Paid whether you show up to work up or not? Really? Is this true of all civil service jobs all over NY State and elsewhere? Are we really paying the parking meter enforcers to stay home? Can Rob Perry or Craig Haigh just come to work when they feel like it or not at all? Great work if you can get it!

  4. Mr. Friedman is on the right track, but alas the reality is worse than he suggests - a lot worse in all probability. First, the so called "assets" of the city (other than short term liquid assets), are carried on the books at their cost basis, not their liquidation value, would would be far less. Second, those bricks and mortar assets are really liabilities that require maintenance for the city to carry out its basic functions. Traditional balance sheet solvency analysis is almost wholly irrelevant for cities. And then there are all of those off balance sheet liabilities, that are not carried on the books, such as future maintenance costs that are unfunded with a sinking fund. "Vinyl Village" is an example. Is there a sinking fund funded by the developer for the future cost of maintaining all those streets, and in particular that long street that snakes up the hill. Not to my knowledge. In a decade or so, if not sooner, the bills will start rolling in.

    What is really needed is a long term cash flow analysis of future expected revenues versus future expected expenses, both present valued. Has the city ever done that? Of course not. If it did, it would almost certainly find that the number is negative (yes, the right word here is insolvency), requiring a ratcheting up of the already high (2.6%) property tax mill rate in the city that would not be sustainable, because it would make it largely uneconomic vis a vis reasonable alternatives to live in Hudson.

    The subject project also very probably portends a lot of unfunded future expenses. Does anyone think that the 20K per year that the city would get in additional property taxes will fully fund the additional service costs that the residents (many quite low income) would require? And would the 40K in additional in school taxes per year fully fund the additional costs of educating the school age children? I don't think so. There are of course reasons some will support the project never less, and it is a matter of balancing the competing considerations, and different folks have different priorities, and I respect that. But from a fiscal standpoint, I would be shocked if a proper analysis found anything but that from a fiscal standpoint, financially for the city, it will be taking on yet another substantial fiscal liability. That means either over time cutting programs elsewhere or raising the already high Hudson mill rate. There is no escape.

    What would be really unconscionable is doing what Hudson has typically done in the past - do no financial analysis at all that is remotely appropriate for a municipality and its long term financial health.

    Finally, thank God for the lodging tax. Some may hate the tourist industry, and it does have its negative aspects, which I could enumerated but enough already, but without it, this city would really be a very financially sick puppy.

    And I will not help the city get more money out of threatening to secede from the county sales tax pool, unless and until I am satisfied that it starts doing appropriate financial analysis and starts to live within its means. And in that regard, my life expectancy is now rather short given that I had massive congestive heart failure and almost died, and am not out of the woods yet.
    So I might not be around that much longer do it. We shall see. In that regard, perhaps you might wish me luck.

    End of rant, and thanks for listening. No doubt the above rant has more than its share of typos which I apologize for in advance. But I found my rant therapeutic, and so for me it was worth it.

    Best to all, Steve

  5. It’s unbelievable that the Mayor’s Office, Common Council, and Common Council President can collectively lack any sort of creativity in this crisis. Since they don’t seem to have any ideas about what they could do to help I’d like to offer a few:

    1) Do the city budget cutting NOW! Have budgets that reflect declines in revenue by 10%, 20%, and 40%. Things are not going to just bounce back in July- particularly in a city where the economy is almost solely based on health care and tourism. Most revenues from hospitals are from elective surgeries which won’t begin again for months - and expect tourism to be down 95%.

    2) Ask one Common Council Member from each Ward and four Ward Supervisors to resign. We don’t need a city government this top heavy- particularly if they aren’t actually doing anything. Wouldn’t this save about $100K in stipends and health insurance in the coming year? Also get rid of the unnecessary role of Mayor’s Aide. In this crisis the mayor should be able to write his own speeches and answer his own phone and email.

    3) Rethink the Common Council Committees for the near future. Have them all focus on plans to help the city recover. Obviously, a Health Committee should be immediately formed and actual experts from the community to advise the committees should be appointed.

    4) Suspend, forgive, and/or lower property taxes to at LEAST what they were before last summer’s insane reassessments.

    5) Suspend property taxes on rental properties in full for all landlords who suspend or offer their tenants rents 50% below monthly leased rate for the rest of the year.

    6) Request that Common Council members and Ward Supervisor lead by example in regard to suspending rents for tenants. There are too many Common Council members and Ward Supervisors who are landlords who pretend to be social “activists” and “revolutionaries” yet hide when activism means their own bank accounts or trust funds will be impacted. Every other city government group has done this but the Common Council and Ward Supervisors.

    1. John, I hate to say it, but the answer to all your sensible suggestions was given the other night when the Mayor and CC passed a resolution promoting a 40-year tax break for a rich out-of-town developer already known to be holding dozens of apartments empty and raising rents on dozens of others.... But don't give up. Now more than ever we need sensible voices like yours. Thank you.

  6. Before we replenish the treasury with short term rentals and tourism, let's figure out how to put CMH back together again. The hospital furloughed 125 workers yesterday, including rapid care and emergency room staff, and there is little capacity beyond treating Covid19 patients. That won't change until the number of Covid19 hospitalizations decline. If new cases arrive, it just prolongs the misery. If you don't like that prerequisite, talk to Cuomo.

    Before we invite people to Hudson, we need a functioning health care system.

    1. It's my understanding that the 125 furloughs had to do with elective surgeries being canceled, not a lack of capacity. You are correct that this won't change until the number of Covid cases decline. Make sure you keep that mask on.

  7. The fund balances minimum 25% of unrestricted funds is based on the total adopted budgeted expenditures of the general fund - and are unrestricted. The other four classifications in the general fund are:
    *Non-spendable: prepaid insurance; inventory & cemetery perpetual fund.
    *Restricted: designated reserves available for appropriation for a specific use, ex: capital or debt reserves.
    *Committed: unrestricted - not available for appropriation ex: amounts constrained to specific purposes by the City through the Common Council done by local law or resolutions. And finally - *Assigned: unrestricted and available for appropriation - ex: encumbrances - bills paid in current year that were invoiced in a prior year; Water, Cemetery & Sewer funds.

    I think Stewart's and The Truck study fall under committed (I could be wrong - I'd have to look up the resolutions). If so, I think those funds could be uncommitted.

    And the fund balance policy dictates that when it falls under 25%, the Council shall, "In the event the unrestricted unassigned fund balance for the City’s General Fund falls below the minimum requirement of 25% for any fiscal year, the BEA shall prepare and submit to the Common Council a plan to restore the balance to the minimum target level in the next budget year or other appropriate period of time."
    There is also the fact of the new ladder truck that was resolved to be purchased and the funds there are in a ladder truck reserve. The city was supposed to put $100K a year into that fund to lower the overall costs that we would be faced, when making the purchase on delivery in 2021.

    Finally - I'd love to see a bounce back on tourism but to be perfectly frank, when I inquired about to the Council if the housing proposal's finances been vetted & if the PILOT amount was appropriate for city services - by the Council, I was told by the council president, "Many of us on the Council have been devoting much time to researching this housing project." I responded back, "I assume that the work the City has done in research confirms a financial vetting was done on the PILOT to confirm viability for the project and that the $20K or so in dollars will meet the needs for city services and I look forward to listening into the meeting tonight."

    When I finally listened to the meeting, to my surprise, the council said they never saw the financials and the Council's lawyer had them and would forward them to the council to review.

    So - I take any future assumptions of articles about our bounce back from the council with a grain of salt, since they said they vetted this project yet didn't even have a document in front of them to vet.

  8. And to add to the fund balance - the range is 25%-35% - the high end of this is to trigger in case of a surplus, as we don't want the city to be taking in more money than it needs to operate.
    In the case of a Surplus:
    o In the event the unrestricted unassigned fund balance of the City’s General Fund exceeds the maximum requirements, the excess may be utilized for any lawful purpose approved by the BEA and authorized by the Common Council.
    o In order to minimize the long term effect of such use, the excess shall be appropriated to fund one-time expenditures or expenses which do not result in recurring operating costs, or other one-time costs including the establishment or increase in formal Reserve Funds.