Comptroller: Granville fiscally stressed, Whitehall not

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DiNapoli

By Krystle S. Morey and Matthew Saari

Granville is the second-most fiscally stressed village in the state, and trending to get worse unless action is taken, while neighboring Whitehall is one of the least stressed.
A report released by state Comptroller Thomas DiNapoli last week pinpointed Granville as the most fiscally stressed village in the state except for Ellenville in Ulster County, receiving a “moderate fiscal stress” rating.
Whitehall was among the municipalities which earned a “no designation” rating.
In 2016, Granville’s fiscal score was 56.3 percent, compared with Whitehall’s 15.8 percent. The data used in the report was submitted by each municipality as of Dec. 31, 2016.
Each village’s score was derived from numerous indicators both within and without the municipality’s control. These indicators range from budgeted items such as deficit, fund balance and environmental factors such as population decrease, property values and local unemployment rates. Each municipality accrues points based on the trends of each indicator.
“Granville has increased over the last four years,” said Brian Butry, a Comptroller’s Office spokesman. “They went from no designation in ’14 and they were just outside of the susceptible category in ’15 … and then into stress this past year.”
Granville Mayor Brian LaRose responded to the scathing report this way: “It’s pretty much what we anticipated.” He reiterated the view he and other Granville officials hold that the state is trying to force the state’s villages into consolidating and incorporating into surrounding towns in an effort to reduce overall operating costs.
The state expects that a village’s reserves amount to a minimum of 10 percent of its assets.
Granville’s fund balance is about 8.2 percent, LaRose said.
“We are not financially stressed, but we don’t have the reserves that we would feel comfortable or that the state would feel comfortable that we have,” he said.
Said LaRose: “It was pretty much the same level that we were assigned last year: classified as moderate financially stressed,” LaRose maintained, “but we don’t have the reserves that we would feel comfortable or that the state would feel comfortable that we have.”
When asked if Granville would need to cut services or explore layoffs as a means to salvage funds, based on its fiscal stress trends, Butry said local officials will ideally use the Fiscal Stress Monitoring System to identify problem budgetary areas and determine where to make cuts.
As for services the village offers, LaRose said the village board has “already trimmed the fat.”
“I don’t think there is any more room for cuts,” LaRose said. “That’s one thing that the board does not want to do is anything that’s going to sacrifice or minimize the services that we’re going to offer our constituents.”
LaRose said, though, that village officials will look at restructuring in the upcoming fiscal year.
“Restructuring…as far as how we do business as a village,” he said. LaRose said Granville officials feel the state is trying to dissolve its villages completely.
“I think it’s a state tactic … as far as the tax caps go, it’s pretty much a stranglehold on small municipalities to comply with the tax caps. In my opinion, it’s the state’s way of dissolving small municipalities, to get them to consolidate and incorporate into surrounding townships,” LaRose said.
“In theory, that’s not a bad think, but you lose a lot of the specifics that the village offers to its constituents as far as services,” he added. “Without a doubt, services would be compromised if something like that was going to happen.”
LaRose cited a few additional things the village is doing to help build its reserves, including exploring shared services with nearby municipalities including Whitehall. The villages already share a police chief, but no additional conversations have begun yet, LaRose said.
“I should be starting conversations with those folks sometime this summer,” he said.
“These are not short-term solutions,” he said. “These are long-term solutions – things that are going to take time to build.”
Butry said: “The goal is to highlight each of these individual areas … and be able to point out to local officials, ‘this is where you may need to focus your attention both in the upcoming budget planning and long-term budget planning.’
LaRose blamed complying with state mandates and clean-up after Hurricane Irene in 2011 as reasons for the erosion of the village’s reserves.
“It’s not any one big thing. It’s been a series of different things, but … the state mandates have probably been the catalyst to our issues,” LaRose said.
Over the last five years, LaRose said, the village has spent more than $10 million – comprised of its own money and grants – to comply with water and sewer mandates. It is still paying back more than $260,000 of that cost, he said.
“That’s monies that we can’t direct into our reserves,” he added.
Regarding Hurricane Irene, LaRose said: “We had to dig into our reserves to fix some of those things.”
LaRose said the reason he and the board decided to again override the state’s tax cap (1.15 percent) for the upcoming fiscal year with a 3.96 percent tax increase can largely be attributed to replenishing Granville’s fund balance.
“A lot of the money that we are going to generate by overriding that tax cap is going to directly help fund our reserves,” LaRose said. “That’s the main reason why we did what we did,” he said. “The main goal through all of this is to build our reserves.”
Fiscal stress in Granville has grown each year recently, from 24.2 percent in 2014 to 42.9 percent in 2015. Whitehall’s fiscal stress has remained consistent since 2014 and is projected to stay at the 15.8 percent level for 2017.
“In Granville, where you see 10-15-point increases in stress, rather than decreases, it looks as if village officials don’t address some of the issues that have come up in the past few years … they are going to be moving in the wrong direction yet again.”
According to the Comptroller’s data, if it keeps operating the way it is, Granville is projected to have significant fiscal stress with a 73.2 percent fiscal score by the end of 2017.
The state, based on this data and other concerns, plans to audit the Village of Granville.
“We have yet to begin the audit,” Butry said. He said the Comptroller’s Office will first complete a risk assessment, which it does prior to each audit.
Regarding the Comptroller’s upcoming audit of the village, LaRose said: “This is something that we’ve gone through before.”
“They do want to make sure every house is in order,” he added. “I think it’s a good exercise. Things change over time. There may be a better way of doing things and these types of audits bring those kinds of things to light. If it’s something that we can do better … then that’s also a good thing.”
LaRose said he and village officials will take the comptroller’s report and use it as a tool going forward.
“I don’t think it would be wise if we didn’t,” he said. “Anytime that you’re given information that could potentially be leading you in a direction that you have to take some notice of, then I think it’s important as leaders of the community to take that into consideration.”
Butry cited other municipalities outside of New York where some of the fiscal and environmental indicators were not being monitored and scored regularly.
“When some of these problems had gone unchecked or unanswered … that has led to significant cuts in services, layoffs, municipal bankruptcies … that’s the real impetus behind why this system was put in place years ago by Comptroller DiNapoli,” he said.
There were a number of key factors that contributed to Granville’s fiscal stress, including a depleting fund balance and operating deficit. In 2016, the village had a general fund balance of $95,950 with $284,274 in combined funds, down from $176,815 and $680,268. Its unassigned fund balance decreased from $157,807 general and $651,261 combined in 2014 to $56,386 general with $244,710 combined last year.
Butry emphasized the importance of municipalities having access to a healthy fund balance. He said the depletion of “rainy day funds” makes any municipality, including Granville, vulnerable.
“It’s the ability for some of these municipalities to weather any type of budget storm that may come up, whether that may be a downturn in revenues from one year to the next, emergency appropriations they need to make during a budget year … anything that’s really going to impact their bottom line, they are going to need to rely on having this cushion,” Butry said.
“… so you don’t have to go to taxpayers and look at raising taxes a significant amount to offset this from one year to the next,” he added.
Granville’s operating deficit was also of concern to the Comptroller’s Office.
“They’ve had an operating deficit for three straight years,” Butry pointed out. He said this was due largely to Granville depleting its fund balance – what the Comptroller ranks as the main driver of fiscal stress – each of the last three years.
The village’s expenditures remained relatively steady, but revenues declined. Its gross revenues last year were $2,141,824 with $2,255,971 in expenditures (a $114,147 deficit). This compares with $2,218,486 in revenue with $2,480,312 in expenditures in 2014 (a 261,826 deficit).
“There’s no quick fix, no one-size-fits-all approach to say, ‘hey, this is what you need to do to get yourself out of there,’” Butry said of municipalities reducing their fiscal stress.
“Obviously that’s not going to be something that local officials are going to be able to be fixed overnight,” Butry added. “They can start to use this system for that long-range budget planning and try to turn the tide of where their finances are headed.”
Ken Bartholomew, who was mayor of Whitehall during the reported time frame, cited some of the initiatives that officials pursued to put the village in such a strong financial position.
“A lot has to do with watching what you’re doing and making do…Just being fiscally responsible and being aware what the village is obligated to,” Bartholomew said.
He went on to explain that when making purchases, officials often didn’t immediately spring for new items. Bartholomew cited the example of vehicle purchases to illustrate his point.
One of the initiatives Bartholomew said contributes to Whitehall’s fiscal well-being was the pursuit of unpaid water bills he undertook during former mayor Peter Telisky’s second term.
At the time there was about $150,000 in unpaid water bills. To remedy the situation, Bartholomew said the village began putting liens on property. As a result, the money has been paid and there are fewer offenders, he said.
In addition to the liens, the state Comptroller visited Whitehall a few years ago and audited the water department. The audit revealed the water department wasn’t paying for itself and the village was borrowing money from the general fund to make up the difference. The data from the audit led Whitehall officials to the answer.
“We gradually raised the water bill and right now the water department seems to pay for itself,” Bartholomew said.
A unique program that Whitehall has in place is the lumber-harvesting initiative.
In 2009 Bartholomew and trustee Walt Sandford spearheaded a logging contract with Fort Ann-based Allen Forestry to harvest lumber from village-owned property in the Pine Lake region. At the time it caused much controversy, Bartholomew said, but it has paid significant dividends to the village.
“If we don’t make money, we don’t cut the trees,” said Bartholomew.
The Comptroller’s Office uses the annual fiscal reports from each municipality and ranks them using a Fiscal Stress Monitoring System. The system examines financial information and provides warnings of fiscal stress and feedback to local leaders, state officials and taxpayers to help them prioritize the needs of their community, understand trade-offs and follow through with tough decisions, Butry said.
“The goal behind putting the system into place was to give not only local officials, but residents, an idea of where their community’s fiscal health was,” said Butry.
“Does this mean lights-out for anyone in New York State? Probably not,” he said. “But there are dangers out there for municipalities that are trending in the wrong direction and that can be any number of things. It could just mean higher taxes, the potential of loss of services the people in that community have come to depend on … a quality of life issue residents could have to deal with.”