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Schenectady Mayor Stratton Leads Effort to Restore City’s Fiscal Credibility

by Schenectady (NY) Mayor Brian U. Stratton
May 22, 2006

Schenectady achieved a financial milestone recently with its return to an investment-grade credit rating by Moody’s Investors Service. To some, this may hardly seem cause for celebration. But for Schenectady, a city that just two years ago held the single lowest credit rating of any municipality in New York, it is a real achievement. Under a new administration, Schenectady has not only rebounded from “junk-bond” history, its future looks brighter than it has in decades.

When I became mayor in 2004, our administration inherited what could only be described as a fiscal train wreck. Schenectady’s cumulative deficit was projected at more than $10 million, its credit rating was at rock bottom, and the state comptroller was predicting the city would run out of money in a matter of months. To survive, we had to make some very difficult choices in a very short order, or else turn over operations to a state-imposed financial control board.

Working with our city council, the county legislature, and state leaders, we quickly put a recovery plan into place. By increasing revenues and reducing expenditures through a variety of measures, Schenectady has come back from the brink of bankruptcy. In 24 months, the projected $10.2 million deficit has been eliminated, as we finished 2005 with a combined funds surplus of nearly $5 million.

During that time, we have attracted more than $150 million in new investment in our downtown, paving the way for a significant increase in our city property tax base. Downtown projects now under construction, or scheduled to begin soon, include a new hotel, a 6'screen cinema, an I-Max style theater, a business and technical trade school, new restaurants and cafés, several high-tech companies, loft housing, and a new YMCA.

While Schenectady’s fiscal turn-around was born out of the need to act decisively amidst a crisis, the components of our recovery can be individually applied by any municipality with a need to improve cash flow, reduce debt or to make operations more effective and efficient.

Hiring the Right People

Never underestimate the value of hiring qualified people. As mayor, I began by bringing in a team of experienced financial professionals. Their common sense solutions, such as investing cash daily, quickly began to show results by generating thousands of dollars in new revenue. Instituting tighter controls on spending and demanding greater accountability from department heads were other simple, but essential, changes.

Our new team also implemented a number of innovative and strategic measures, including the following:

Recovering Delinquent Property Taxes

With home rule approval by the New York state legislature, Schenectady has recovered more than $14 million in delinquent property taxes since 2004. To date, the city has completed three individual tax lien transactions with American Tax Funding (ATF), a Florida company specializing in purchasing the right to collect delinquent taxes. The city has gained by recovering thousands of dollars in uncollected taxes, while ATF works with tax delinquents by offering a range of flexible repayment plans to help them hold on to their properties.

Increasing Revenue Sharing

Working with the governor and our state representatives, Schenectady has permanently increased our share of unrestricted state aid received from Albany. Since I became mayor, our city’s annual revenue sharing has increased by nearly 75 percent, growing from $5.7 million received in 2003 to nearly $10 million this year.

Consolidating Municipal Services

Through a cooperative service agreement that is expected to save taxpayers up to $5 million through 2009, Schenectady combined its vehicle maintenance operations with Schenectady County. This consolidation of services has not only made our fleet safer and more efficiently maintained, we have reduced our annual fuel consumption by 15,000 gallons.

Generating Revenue through User Fees

Perhaps the most controversial, but critical component of our financial recovery was the addition of a residential waste collection fee to property tax bills beginning in 2005. The new fee-based system, with separate rates for one-, two- and three-family residences, now generates nearly $3 million in additional annual revenue. At the same time, it provides a more equitable means of payment based on a homeowner’s typical garbage output rather than the taxable assessed value of his or her property.

Reducing the Health Insurance Costs

Concessions gained from our two major labor unions now include a lifetime 20 percent contribution by all employees on individual or family health insurance plans. Along with increased employee co-payments for prescriptions and doctor visits, these changes will ultimately save taxpayers almost $2.5 million per year. In addition, we have renegotiated our city-administered health insurance plan with a new carrier, saving taxpayers $1.3 million last year alone.

As the Moody’s report says, Schenectady’s fiscal condition is now stronger than it has been in years: “Through careful budgeting, the reengineering of certain services and contracts, and a willingness to raise revenues, this administration’s team has restored fiscal stability to the city.”

In Schenectady, we had little choice but to make real change, the results of which have helped to secure its financial future. Our leadership has renewed public confidence in Schenectady, with new businesses and residents coming to our city every day. Indeed, our future is brighter, built upon a strong foundation of prudent financial management.

For more information, call or write Schenectady Mayor Brian U. Stratton, 105 Jay Street, Schenectady, NY 12305; telephone 518-382-5000; e-mail