LOCKPORT – The City of Lockport still has financial worries, but things are looking up, a report from the state Comptroller’s Office said Wednesday.
The city, which last year obtained a special act of the State Legislature to pay off its accumulated deficits by borrowing more than $4 million, was listed in the annual report on troubled local governments as “susceptible to fiscal stress.” That’s an improvement from its “moderate fiscal stress” rating two years ago.
Brian Butry, spokesman for Comptroller Thomas P. DiNapoli, said the city probably would have been on the stress list last year, too, but it couldn’t be rated because Lockport failed to complete its 2013 financial statements on time. Audits by the Comptroller’s Office have blamed City Treasurer Michael E. White for that; White has blamed the city’s other elected officials for failing to fill vacant positions on his staff.
Mayor Anne E. McCaffrey hailed the report. “I believe this is verification that we are emerging from fiscal stress and we are on more stable financial ground,” said McCaffrey. She said the city is on pace to avoid a deficit in 2015 for the second year in a row.
“They’re not out of the woods yet,” Butry said. “They’re still walking a financial tightrope.”
White said he believes that those results show the fiscal emergency wasn’t as severe as McCaffrey thought it was. “That is not to say that there was no deficit, or that a deficit would not need to be financed,” White said. “But the State Comptroller’s stress rating analysis shows, in hindsight, based on objective data, that the situation was already improving. Had the city been able to move, and moved less abruptly, and with more prudence, the price paid for financing the deficit might have been considerably less.”
The interest rate on the deficit bonds is 5 percent, more than twice as high as the rate the city paid for a bond issue in 2012.
The Comptroller’s Office uses a 0-to-100 scoring system to rate the fiscal performance of local governments, based on multiple factors. The higher the score, the worse the financial problems are.
Those between 45 and 55 points are considered susceptible to fiscal stress; Lockport’s score is 49.6, but two years ago it was 59.2.
Butry said, “Fund balance is weighted the most heavily, the amount of money a government has in its reserves.”
“We had fund balance creation in all funds,” Finance Director Scott A. Schrader said. However, he said the revenue from the emergency borrowing – which has to be paid back over the next decade – was “not the only reason, but a key reason” for the positive numbers.
The 2014 financial statements, on which the Comptroller’s Office based its new ratings, showed the city had a $1.26 million general fund balance at the end of last year. But if you leave out the amount of the deficit borrowing assigned to the general fund, the remaining fund balance is only $173,875, Schrader confirmed. The city’s other funds – water, sewer and refuse – also had positive balances before the application of the deficit financing. Leave that out, and water and refuse are still in the red.
Butry said another positive for Lockport was its avoidance of short-term borrowing to pay its bills in 2014, unlike the previous year. A state report last summer predicted Lockport might run out of money during the fall of 2014. McCaffrey and the Council responded by laying off some firefighters and other employees.
“Had we continued to do what we were doing and used short-term borrowing for cash flow, it would have impacted our score and we still would have been in fiscal stress,” Schrader said.
McCaffrey said she and Schrader will present a draft 2016 budget to the Common Council in early October. For the next nine years, the terms of the emergency borrowing require the budget to be approved by the Comptroller’s Office before the Council can formally adopt it, probably at the Nov. 18 meeting. McCaffrey said a Council majority will have to agree on what should be in the budget before it’s sent to Albany for review, because the only amendments that can be inserted after that are the ones that the state orders.