Financial woes for cities in New York's capital region are mounting. WAMC's Capital Region Bureau Chief Grant Ashley joined Lucas Willard on Midday Magazine to discuss financial struggles and downgraded credit ratings on the S&P Global Scale in Albany and Schenectady.
INTERVIEW TRANSCRIPT
Willard: Grant, can you first give me a picture of what's happening in the city of Albany?
Ashley: Albany's credit rating was downgraded by S&P Global Ratings from an A-plus to an A, so that's still a good rating, but not quite as good. And the outlook for the city moving forward is negative. S&P noted that the city has taken some corrective measures. They, of course, got $40 million in state funding to you know plug some holes in the budget, but the city depleted its general fund balance at the end of the year, and so it has limited means to respond to a financial emergency. And S&P noted that the credit rating could be lowered further if things don't improve.
Willard: And what's happening in the city of Schenectady?
Ashley: So, S&P reaffirmed Schenectady's A-plus rating, but the city is on thin ice. They have a negative outlook, and S&P wrote that there's a one in three chance that they downgrade that rating, quote potentially by multiple notches, if the city fully spends its total reserve position without a plan to improve things. And you know, I will also note Schenectady and Albany aren't alone in New York State. Buffalo got its credit rating downgraded this year too.
Willard: What does it actually mean when a city does have its credit rating downgraded? What are the effects on sort of day-to-day operations?
Ashley: It's like if your personal credit score is lowered too, right? It becomes more expensive to borrow money, and then that means when you do borrow money, you're paying more for it, right? So, taxpayer money, you know, might be spent a little less efficiently than it would have if these cities had higher credit ratings. I spoke to Albany Chief City Auditor Sam Fine, and he also said that you know some of the issues that are causing Albany's credit rating to go down, you know, are creating other financial issues for the city as well.
Fine: I mean, we're determined to improve our financial situation not just for the credit rating, but because it's important that we it's important that we have reserves for you know rainy a rainy day fund for when things go bad, and it's important that we have the that we're we have a fiscally sound budget, a balanced budget.
Willard: So, Grant, as you mentioned a little earlier, Albany got a lot of money in the most recent state budget to help with some of its financial problems. But could you give me a little more context about some of the trends, what's actually been happening, and and how that's dragged down the city's finances.
Ashley: So, Albany had some revenue shortfalls last year, and they ended the year with $0 in their unrestricted fund balance, right? So basically, you know, $0 in their checking account. Mayor Dorcey Applyrs, and Fine, when I spoke to him, have blamed their you know predecessors in the mayor's office. Applyrs has also touted some measures to reduce spending. Right, she hired a former deputy state comptroller. They've cut some spending. They put in a you know hiring freeze earlier in the year. And Applyrs used to be a city auditor. She said back in March that she wasn't aware of the city's financial condition until she became mayor this January.
Applyrs: I would say, as someone who served as the city auditor, having access to all of the information that I did have, this this is not something that a city auditor, given the the responsibilities per the city code, that I would have seen.
Ashley: Yeah, and then I'll just say for Schenectady, you know, they had some contentious budget discussions last fall, and tensions are still high in the city government there, so that could play into this year's budget cycle coming up.
Willard: And so, Grant, your reporting has also pointed to a recent report from the city's Office of Audit and Control, and that is in relation to how the city spends its money on employee health care. So what happened there?
Ashley: Basically, the city sent out a $2.25 million overpayment related to employment healthcare. The Office of Audit and Control identified that before it went out. You know they would have gotten that money back in a couple months, but Fine told me that that could have affected the city's liquidity in the short term.
Fine: There was talks earlier this year about whether or not the city would have to borrow money in order to pay our bills. You know, we're always concerned about cash flow, especially during these difficult fiscal times. So, it's really important that we don't send $2.25 million dollars out the door to a private health insurance company.
Ashley: And then, the audit office also identified another $226,000 in unnecessary costs. So that's like duplicate payments, the municipal equivalent of the Netflix account you forgot you had for six months. That's probably money that the city wouldn't have gotten back if it made it past the auditor's office and the treasurer.
