Archive for November, 2013

Crunching the numbers: take two

Posted: November 18, 2013 in Government
Tags: ,

I received some very good feedback from former Alderman Bill Wills and Flippin on my previous post that attempted to show a “balance sheet” of sorts for the city finances. Wills pointed out that any money spent from borrowed funds was included in the reported expenditures. Being that the debt service (ie money spent paying back the borrowed funds) is also included in the expenditure figures, my math showed a greater imbalance than there really was.

So with that in mind, I’ve created another table which simply takes the debt service figures out. This method is essentially how I create my own profit and loss figures for my business. If I borrow money to pay for something, I record the expense. However I do not record the payments on that debt, otherwise I would essentially be doubling that expense. I certainly record the payment in my checkbook, just not on my profit and loss statement.

Year 2000 2001 2002 2003 2004 2005
Revenue $20,108,331 $19,233,815 $18,409,146 $20,033,367 $21,733,043 $21,554,052
Expenditure* $21,640,008 $23,740,494 $20,139,283 $21,452,114 $22,292,403 $22,311,288
Debt Service $1,385,506 $2,816,708 $1,331,817 $1,521,294 $1,626,424 $1,989,216
-$146,171 -$1,689,971 -$398,320 $102,547 $1,067,064 $1,231,980
Duchessi Duchessi Duchessi Duchessi Emanuele Emanuele
Year 2006 2007 2008 2009 2010 2011
Revenue $23,487,861 $23,846,756 $19,589,783 $25,285,206 $30,411,542 $28,643,909
Expenditure* $28,811,482 $24,458,481 $25,664,099 $27,291,345 $34,802,682 $38,779,386
Debt Service $1,660,134 $2,746,389 $2,491,959 $2,245,054 $2,739,152 $5,884,650
-$3,663,487 $2,134,664 -$3,582,357 $238,915 -$1,651,988 -$4,250,827
Emanuele Emanuele Thane Thane Thane Thane

The numbers are from the NY State Controller’s website.  *Please note, the expenditure figures from the state include the debt service amount. I am listing the debt service amount separately for reference.

This method is still not perfect. Obviously municipal finances are lot more complicated than a small business. One aspect I know is missing is that interest paid should be listed as an expense. However I don’t have figures as to what percentage of the debt service amount is principal and what is interest. I also know that the figures as reported to the State Controller’s office are not 100% correct – although I would argue that the fact that the city is not bouncing checks means that they probably aren’t that far off. I think the numbers are still usable. I think it’s better to get a fuzzy picture than no picture at all.

So why do this at all? It’s because what passes for debate on the city’s finances around here is complete garbage. The dialogue coming from elected officials, former elected officials, residents or the local media establishment boils down to over generalizations, flat out inaccuracies, emotionally driven invective and politically motivated finger pointing. And none of this serves the public at all. It pains me personally that things like historical preservation, the arts, city beautification efforts, community volunteer efforts, all things which I and many Amsterdam residents value have been dragged through the mud in this election as the alleged “cause” of our financial woes when nothing could be further from the truth.

I’ll include one more graph that sheds some additional light our city’s debt situation.

debtchart

Why am I including the former mayor’s names here? Because more than one person has drawn comparisons between Joe Emanuele and Ann Thane, portraying Emanuele as some sort of financial savior who always kept us in the black (which he did not) and somehow kept us out of debt (also incorrect). The fact is that in 2006, during Emanuele’s term, we saw the 2nd biggest jump in debt in the past 11 years.

I am stating that for the sake of perspective. I’m not trying to detract from the very large increases in debt under Thane’s term. The numbers show that the debt problem is getting worse. I think the Mayor bears her share of the responsibility for the financial situation. To be fair, one has to recognize that there was a major recession in 2008 and that operating costs (like energy and health care costs) have been soaring. It should also be pointed out that Thane, along with the common council, has found significant budget savings by cutting benefits costs, as well as increased revenue from sales tax and water fees. Without these measures, we’d be in a much worse situation. However, it’s obvious more needs to be done.  I think if we could understand why we saw such huge jumps in our debt in 2006, 2009 and 2011, we would be a lot closer to understanding what is going wrong.

I have no doubt that there are individuals in Amsterdam who are far more knowledgeable and qualified to analyze and communicate the financial situation for us folks with an average understanding of such things. So if you’re looking at these charts and thinking they miss the mark, I’d be glad to hear how you would do it differently. I’ll gladly accept informed criticism here – anything to get us discussing the real issues rather than slinging mud around like crazy people.

In the city races, it seems to me that the lack of differentiation between the candidate’s platforms resulted in a situation where perceptions, personalities and past experience were the most important drivers.

I think the release of the draft state audit (which was published in October – surprise!) was probably the most pivotal element in the election. I also think the way the Recorder covered and editorialized the financial situation – before and after the draft audit release – did it’s part to amplify voter outrage. Even though the problems with the city’s books had been known about for years, and the Mayor and Common Council had recently implemented measures to correct the situation (such as hiring the Deputy Controller), there was something about seeing it all laid out in the state audit that was extremely jarring and disheartening. I felt it myself.

In short, the Mayor’s defense didn’t get much traction. Saying it was “all good” and referring to some emails she sent to the controller a while back came across as passing the buck rather than demonstrating proactive leadership. The audit confirmed the accounting problems were widespread and had gone on for far too many years without anyone taking any decisive action. Even though neither Republican or Democratic candidates offered any substantial ideas as to how to do things any differently than what was already being done, I believe the Republicans who won benefited greatly from the public’s perception of the Mayor’s role in the situation. And perception is reality – that’s how it’s always been.

I do want to give some credit where it’s due – I have to say that 4th Ward winner Diane Hatzenbuhler has  offered a ton of specific ideas over the years – many on this blog and on others – as to how she would solve many of Amsterdam’s problems. I personally don’t agree with some of those ideas, and I think other ideas lack key details (like how to pay for them). But if she is able to implement even a handful of them I think the city could benefit. Many candidates have given lip-service to the idea of increased code enforcement. But if Diane is able to really apply herself to this issue, maybe we could get somewhere.

I also think the example she has set by coming back twice now after two election defeats is an object lesson in dedication. She has shown that if you truly care about something, you don’t give up. I think some of the losing candidates this year would do well to follow her example.

It will be interesting to see how things play out now that the Common Council will have a veto-proof Republican majority. They will clearly be in the city’s driver’s seat for the next two years and so any success or failure will completely reflect on them in the next election.

I genuinely hope that the new council does well. The state audit and numbers from the state controller’s office show we need get our books and debt under control. Balancing the budget and reducing our debt will require the council to make some tough budget decisions. I think some fiscal conservatism is probably what is needed right now to get things back under control.

However, given many local Republican’s (and not a few Democrat’s) bent toward the idea of regional consolidation, it would not surprise me if instead of working hard to cut expenses and increase revenues, that the idea of declaring bankruptcy or turning over our finances to the state were seriously explored. After all, the population has already been “primed” for this idea anyway. This would essentially amount to giving up being an independent city and would pave the way to creating one BIG regional government. I sincerely hope that doesn’t happen.