City of Poughkeepsie owes $7.8 million and counting

Money owed by the City of Poughkeepsie continues to mount as the new administration unearths unpaid bills totaling more than $7.8 million.

In the first month since taking office, Mayor Rob Rolison's administration has discovered Poughkeepsie owes money to various entities, from the state pension fund to Dutchess County to vendors. The money owed includes:

• $461,605 to Dutchess County for collected property taxes.
• Roughly $1 million to 99 vendors for services rendered to the city.
• $1,208,455 to the Poughkeepsie City School District for unpaid and uncollected taxes in the city.
• $4,327,380 plus $811,880 in interest to the state pension fund, which has been put aside to pay off more gradually over 10 years as part of a state initiative municipalities can opt in to.

That doesn't even take into account the $11 million general fund deficit the city is facing. And, the true financial strains the city faces are unclear as the city administration continues to find budgetary concerns while unraveling the 2016 budget.

“We need to fully understand the financial picture of the city, and I think right now we don’t know that and I’m concerned about that,” Rolison said. “We have not been given a very accurate financial picture, because we’re still trying to get the budget in a form that has detail to it.”

Rolison said the city plans to make good on the past-due bills, while also developing long-term financial planning to help put Poughkeepsie on the road to recovery.

City of Poughkeepsie owes school district $1M

Former city Administrator Milo Bunyi said cash flow issues are what led to the city's predicament.

“The bottom line is that the city has always had the challenges of balancing revenue versus expenses,” he said. “I know the previous administration has tried to generate as much revenue and reduce expenses, but when it’s no longer available, the only option you’ve got is raise taxes…you can only tax people so much.”

This year's $83 million city budget carried a tax increase of more than 7 percent, according to Journal archives. The tax levy, or the amount set to be raised by property taxes, is about $20 million. Former Mayor John Tkazyik initially proposed a budget that would carry a 5 percent tax increase, but also laid off seven employees in the police department. Tkazyik did not return calls for comment.

Poughkeepsie isn't the first local city to face financial challenges.

Back in the 1970s, the City of Beacon faced similar financial issues, current Mayor Randy Casale said. He said the city wasn't making the Beacon City School District whole on unpaid property taxes due to the district and sometimes failed to pay vendors in order to make payroll.

"They were worried about making payroll. It was from week to week, and it was tough times then," he said. "It's poor budgeting practices when that happens."

Casale said Beacon hasn't had issues with meeting its obligations in the eight years he's been office — as either a councilman or as mayor. He said Beacon budgets for uncollected taxes — something Rolison said Poughkeepsie hasn't done and didn't do for the 2016 budget — and makes hard decisions when it comes to taxes. If taxes don't go up for years in your community, but surrounding municipalities have increases "something should strike a light in your head that something's going on," Casale said.

"I put the numbers out that need to be put out there," he said. "It's not about me, it's about doing the right thing for the community.

City of Poughkeepsie budget raises taxes, saves jobs

To combat the cash flow issues, the city entered into agreements and programs that allow it more time to pay off debts. Rolison said it appears this was done to make sure city employees were paid on time, which is the city's "number one priority."

While the state Comptroller’s Office doesn’t plan to audit the city in the near future, state officials said unsecured debt is a consideration when conducting an audit.

The city failed to make its Dec. 15 payment to the school district. Rolison said he’s unaware of any interest accruing when it comes to the outstanding vendor bills, but noted that the money owed is due to receiving bills late as well as a delay in them being processed.

Bunyi said the city didn’t have any outstanding bills as of Dec. 31.

The city has until March 1 to pay the county $461,605 it owes and is part of the state’s Contribution Stabilization Program for paying toward the state pension fund, which allows entities that contribute to the state pension fund to pay a portion of an annual contribution over time.

Dutchess County Executive Marc Molinaro said the county will remain a partner with the city, and has a written agreement that expresses the understanding of the fiscal strain Poughkeepsie is in. The delayed payments hasn’t negatively impacted the county, he said.

“We’re not legally able to forgive all this, but we’re all in this together,” Molinaro said. “Our goal is to provide them the latitude they need as they earnestly address those fiscal challenges.”

As for the pension fund, Bunyi said the city typically paid about one-tenth of what it amortized, or set aside, each year. It’s unclear how much the city has paid off, however the program requires entities pay a portion each year. The Poughkeepsie Journal submitted a Freedom of Information Law request last week with the state Comptroller’s Office regarding the payments, but has yet to receive a response.

“Whatever the bill is…a certain percentage of that is allowed to be amortized over the next few years,” Bunyi said of the pension fund payments. “That’s purely because that’s what we were able to afford. You pay back a portion of it every year over the next 10 years.”

The revelation that the city owes more money on top of the $11 million general fund deficit created by unrealistic budgeting practices based on a 2013 state comptroller audit, comes as a shock to city Common Council members.

“We were kept in the dark on the finances of the city,” Council Chairman Chris Petsas said. “If we don’t have the information in front of us, there is no way we can positively give guidance or support.”

Petsas said requests for more information, like monthly balance sheets on the city’s finances, fell on deaf ears.

City of Poughkeepsie resident Richard Fenner questioned why no one was ever alerted to the unpaid bills and expressed concern of increasing taxes in the coming years.

“This should have been revealed to the city a long time ago, and the fact that it wasn’t is somebody’s fault,” Fenner said.

While Poughkeepsie isn’t out of the woods yet, Rolison said it will meet its obligations with the county and school district and the 2016 payment to the pension fund the city aims to pay in full.

“We will do our very best to make sure people get paid in a timely manner,” Rolison said. “It all depends on cash flow.”

A Strategic Fiscal Improvement Plan being developed hopefully will shed light on how the city should proceed when it comes to long-term financial improvement, Rolison said. The plan was started under the previous administration as a precursor to the state Financial Restructuring Board coming to assess the city’s finances and make recommendations. It was paid for by a grant awarded through the county’s shared services program. In addition, the board could offer grants and/or loans of up to $5 million through the Local Government Performance and Efficiency Program for undertaking certain recommendations, according to the Financial Restructuring Board for Local Governments website.

The Town of Fishkill sought help from the restructuring board after poor budgeting and a lack of rainy-day funds put the community into fiscal stress, according to a comptroller report in 2013.

Despite the challenges ahead, City of Poughkeepsie officials remain optimistic of the future.

“I’m just looking forward to looking at where we have deficiencies and where we can correct them,” Petsas said. “I think better days are ahead for Poughkeepsie.”

Amanda Fries: afries@poughkeepsiejournal.com, 845-437-4824; Twitter: @mandy_fries

City's debts

$4,327,380: New York State Pension Fund 

$1,208,455: Poughkeepsie City School District unpaid and uncollected taxes 

$1 Million: Owed to 99 vendors

$811,880: In interest for the New York State Pension Fund debt

$461,605: Dutchess County property taxes.

More online

To see a video report, go to www.PoughkeepsieJournal.com