Public Hearing to Review State Laws and State-Imposed Municipal Finance Oversight Boards in the Context of Fiscally Distressed Municipalities, and Hear Testimony as to New Initiatives That Provide Relief and Assistance to Fiscally Distressed Municipalities

Richard Milne 87 95 14 Mayor

Village of Honeoye Falls, New York 15

Peter Baynes 96 114 16 Executive Director

Barbara VanEpps 17 Deputy Director & Legislative Director

New York State Conference of Mayors 18

Patrick Malgieri 119 128 19 Co-Leader, Municipalities and

Local Agencies Industry Team 20 Harris Beach, PLLC 21 Diana Smith 132 141

Director of Business Development 22 MRB Group 23 Frances Righi 141 147

Mayor 24 Marcia Ellis 141 147

Village Clerk, and Treasurer 25 Village of Prospect, New York 1 (All participants recite:) 2 "I pledge allegiance to the flag of the 3 United States of America, and to the republic for 4 which it stands, one nation under God, indivisible, 5 with liberty and justice for all." 6 SENATOR MARTINS: Thank you. 7 Good morning. 8 Welcome to the Senate Standing Committee on 9 Local Government's hearing on fiscally distressed 10 municipalities, preparing for and preventing 11 municipal. 12 Bankruptcy in New York. 13 I want to welcome you to this beautiful city 14 of Syracuse. 15 I want to thank Mayor Miner for allowing us 16 the use her city hall. 17 I want to acknowledge my colleagues who are 18 with me today. 19 To my right we have Senator DeFrancisco, and, 20 to my left, Senator Valesky. 21 And I want to thank you both for being here. 22 The issue of fiscally distressed 23 municipalities has come to the fore of late, 24 certainly since the filing for bankruptcy of 25 Detroit. 1 We had been considering holding hearings 2 across New York State, dealing with fiscally 3 distressed municipalities. Detroit brought it to 4 the fore and certainly made it much more poignant. 5 And I think, in our discussions today, and 6 the purpose of our discussions today, is not just to 7 hear about how we need to change Albany's interface 8 with local municipalities, but I hope we can find 9 solutions to that interface; to how Albany and our 10 local communities can challenge some of -- can 11 tackle some of our challenges together. 12 We have a list of wonderful speakers today, 13 certainly people who are dealing with this issue 14 each and every day, not only on a state level, but 15 in the trenches. 16 We have mayors and representatives from local 17 municipalities. 18 So I'm looking forward to the testimony. 19 Certainly, I would ask just a couple of 20 things, and if you would indulge me. 21 As we testify, let's talk about specifics. 22 If there is a particular mandate, let's get 23 to that specific mandate, and let's try and figure 24 out how we can move this process forward. 25 Oftentimes we hear a lot about mandate relief 1 in the general. 2 Let's talk about it in the specific, so that 3 we can start formulating a path towards that 4 partnership that we need between state and local 5 governments as we get through this rather rough 6 patch. 7 Senator DeFrancisco. 8 SENATOR DEFRANCISCO: First of all, can you 9 see me okay? 10 I feel like I need a highchair. 11 [Laughter.] 12 SENATOR DEFRANCISCO: I guess, you know, you 13 see those TV shows, the comedies, where the host is 14 way up here and the guest is down here. 15 Now I see what it's all about. 16 This brings back memories. 17 I used to sit at Jack's seat 22 years ago 18 when I was president of the city council. 19 I don't think I've sat up here since. 20 And -- but I learned a lot here, and 21 I understand the interface between Albany and local 22 governments. 23 And believe me, we're trying to do our best 24 to help the local governments, because no one, 25 including the city in which I live, Syracuse, should 1 be distressed, and we should be doing all we can to 2 make sure that that problem is taken care of. 3 So with that said, I'm looking forward to 4 hearing the testimony of the various speakers, and, 5 hopefully, you helping us get solutions that make 6 sense. 7 Thank you. 8 SENATOR MARTINS: Thank you, Senator. 9 Senator Valesky. 10 SENATOR VALESKY: Thank you, Senator Martins. 11 First, let me welcome you to Syracuse. 12 Senator Martins, as some of you may know, is 13 the senator from Nassau County, and is chairing the 14 Local Government Committee in the State Senate, and 15 is doing an outstanding role in that job. 16 He and I partnered, I think, in a significant 17 way this past legislative session, when we worked 18 together in a bipartisan fashion on one of the 19 Governor's program bills that establishes a new 20 board at the state level; a new tenant-member board, 21 where localities across the state can go and apply 22 to, and seek some support for whatever fiscal stress 23 they may be under. 24 And I think that was a significant step in 25 the right direction, but as these hearings indicate, 1 there is certainly much more that we can and should 2 be doing from an Albany perspective. 3 So, welcome again, Mr. Chairman, and 4 appreciate you being here. 5 SENATOR MARTINS: Thank you very much. 6 As I mentioned, we do have a great list of 7 speakers, and I would like to get started with our 8 first speaker today, which will be the Office of the 9 State Comptroller. 10 Speaking on behalf of the State Comptroller, 11 we have, Robert Ward, deputy comptroller for budget 12 and policy analysis, and, Nathaalie Carey, assistant 13 comptroller for division of local government and 14 school accountability. 15 Please join us. 16 Good morning. 17 NATHAALIE CAREY: Good morning. 18 ROBERT B. WARD: Good morning, Senators. 19 We also joined by Mike Kupferman, from our 20 counsel's office, of course. 21 SENATOR MARTINS: Good to see you again. 22 NATHAALIE CAREY: So, good morning, 23 Chairman Martins and honorable members of the 24 Senate. 25 On behalf of Comptroller DiNapoli, thank you 1 for calling this important hearing. 2 My name is Nathaalie Carey, and I'm assistant 3 comptroller with the division of local government 4 and school accountability. 5 And with me here today is Bob Ward, and he is 6 a deputy comptroller for the division of budget and 7 policy analysis. 8 We appreciate the opportunity to speak with 9 you today about the Comptroller's initiatives 10 regarding local government fiscal stress, and, of 11 course, our fiscal-stress monitoring system in 12 particular. 13 The Office of the State Comptroller contains 14 the largest and most knowledgable concentration of 15 subject-matter experts in the field of municipal 16 finances in New York State. 17 Our agency is a premier source for 18 information on the financial condition of 19 New York State's local governments. 20 Our auditors, researchers, and other experts 21 have been charged with the responsibility of 22 identifying local government fiscal-stress issues, 23 and explaining their causes, in order to inform 24 discussion of corrective actions by the Executive, 25 Legislature, local government officials, and 1 citizens. 2 In 2012 alone, OSC's division of local 3 government and school accountability completed more 4 than 400 audits of individual units of local 5 government and school districts, including many 6 financial-condition audits. 7 Under Comptroller DiNapoli's leadership, this 8 division has released 56 research-policy reports and 9 snapshots, each one effectively highlighting an 10 important topic of interest regarding our local 11 governments' fiscal condition. 12 We are proud of our ability to share our 13 knowledge. In fact, our staff has trained over 14 10,500 municipal leaders across the state in 2012, 15 and more than 40,000 over the last 4 years. 16 In addition to the audits, training, and 17 policy research, Comptroller DiNapoli has charged 18 our division with the responsibility to assist local 19 governments in the difficult task of implementing 20 the tax-cap legislation that was enacted in 2011. 21 We provide the necessary guidance and online 22 forum, and statewide training and outreach program, 23 to assist local officials in meeting their legal 24 obligations under the statute. 25 In the first year, our audit staff performed 1 nearly 800 tax-cap calculations, and helped ensure 2 that local officials calculated their levy limits 3 correctly. 4 OSC staff has developed a multi-year planning 5 template that has become a standard for many local 6 officials as they work towards the goal of increased 7 accountability. 8 We are also -- we also recently released a 9 capital-planning template. 10 And both of those things can be found on our 11 website. 12 When Detroit, once one of America's largest 13 cities and industrial engines, files for bankruptcy 14 to resolve its fiscal woes, it shines a spotlight on 15 the financial challenges facing all local 16 communities around the nation, and, of course, here 17 in New York. 18 Many are wondering if Detroit's fiscal 19 situation and bankruptcy foreshadow what's to come 20 for other local governments as they continue to 21 struggle with issues of financial solvency. 22 Municipal bankruptcies are rare around the 23 nation, and they have never happened in 24 New York State, with good reason. 25 State intervention through conduits, like, 1 aid to localities or AIM funding, deficit financing, 2 various types of oversight agencies, and, very 3 recently, the Governor's restructuring program that 4 the Senator's just talked about, is the main reason 5 why no New York State municipality has ever gone 6 bankrupt. 7 Our leaders recognize that bankruptcy 8 proceedings of municipalities in other states have 9 left fiscal problems unresolved for years, while 10 making it more difficult for local governments to 11 deliver essential services. 12 Comptroller DiNapoli has stated, that, "While 13 bankruptcy is a legal option for most of 14 New York State's local governments, it is the least 15 palatable option and should never occur." 16 Here in New York, the "Great Recision" and 17 our slow national recovery have directly affected 18 several sources of local revenue. 19 A confluence of factors, including decreasing 20 tax bases, growing fixed budget costs, losses in 21 population, and deteriorating industrial sector, 22 have merged to create chronic budget gaps and 23 significant fiscal stress in counties, cities, 24 towns, and villages across New York. 25 Moreover, even in the post-recession period, 1 the revenue situation for local governments is 2 underwhelming at best. 3 County sales-tax collections for 2012 were 4 only 3.3 percent over 2011, compared to an annual 5 average of 5 percent for the decade preceding the 6 recession. 7 Losses in mortgage-recording tax revenues are 8 leveling off, but towns still collected $249 million 9 less in 2011 than they did in 2005. 10 The outlook for state and federal aid is also 11 not promising after a decade of growth below the 12 rate of inflation. 13 And, now, growth in local property-tax levies 14 is limited under the State's property-tax cap. 15 Evidence that this prolonged fiscal struggle 16 is having a very real and adverse effect on the 17 day-to-day operations of local governments is 18 abundantly clear when we look at some of the metrics 19 typically employed to examine their financial 20 situations in August of 2012. 21 At that time, we found that nearly 300 local 22 governments had deficits in 2010 or in 2011, and, 23 more than 100 had inadequate cash on hand to pay 24 their current bills. 25 We also know that fund balances are being 1 depleted at an alarming rate. 2 In our 2012 annual report, we included a 3 cautionary note about how unreserved or 4 non-restricted fund balances, as a percentage of 5 expenditures, were at their lowest point in a 6 decade, and had dropped 28 percent since peaking at 7 9.7 in 2006. 8 These challenges, and the circumstances that 9 drive and deplete the fund balances, are likely to 10 persist for some time. 11 And I think that we can all agree that 12 there's no one-size-fit-all approach to effectively 13 deal with them. 14 That being said, however, we should not be 15 deterred from trying to get a better handle on how 16 these challenges are confronting different 17 communities across our state. 18 Before you can attack a problem, you need to 19 understand what you're facing. 20 This is why Comptroller DiNapoli commissioned 21 the development of the fiscal-stress agenda that 22 includes the fiscal profiles and -- of dozens of 23 New York State localities and an early warning 24 system to present a realistic account of local 25 government finances. 1 The purpose of this agenda is to help foster 2 much needed public discussions about fiscal stress, 3 by clearly defining the issues to be addressed, and 4 providing accurate and objective data analysis, so 5 that corrective actions can be taken. 6 This way, we can reach lasting solution and 7 avoid steps that may cause needless harm to our 8 communities. 9 In other words, we need to continue these 10 discussions, and take corrective actions as soon as 11 possible, so that we can avoid the extreme steps now 12 being considered in Detroit and in certain 13 jurisdictions across the county. 14 I will now focus both on the fiscal profiles 15 and the fiscal-stress monitoring system, also known 16 as our "early warning system." 17 In September 2012, the Comptroller released a 18 report on New York cities, and it was called 19 "New York Cities: An Economic and Fiscal Analysis, 20 1980 through 2010." 21 This detailed the plight of our once vibrant 22 cities. 23 With eroding tax bases, significant losses in 24 population and industrial sector, neither the 25 challenges facing cities, nor the impact of their 1 condition upon the state's own economic and fiscal 2 well-being, can be ignored. 3 After Comptroller DiNapoli took on the 4 critical task of bringing the concerns of our cities 5 to a public light, he developed the city fiscal 6 profile as a platform for focusing more attention on 7 their unique challenges, and how those challenges 8 influence each city's financial landscape. 9 The Comptroller has released ten profiles to 10 date, including Niagara Falls, Salamanca, Rochester, 11 Yonkers, Syracuse, Gloversville, Utica, Elmira, 12 Watertown, and Binghamton. 13 And, we are also poised to release additional 14 profiles over the next few months. 15 A fiscal profile constitutes a succinct 16 factual presentation of the fiscal or budgetary 17 situation as of a fixed point in time, and is 18 targeted in tone and depth to both policymakers and 19 the general tax-paying public. 20 These profiles have cast a much needed 21 spotlight on the issues in the state's cities in 22 particular, but the issues are admittedly, and 23 unfortunately, much more widespread. 24 This brings us to our fiscal-stress 25 monitoring system which is the center piece of the 1 Comptroller's comprehensive fiscal-stress agenda. 2 In light of the daunting challenges facing 3 local governments, our office has developed a 4 fiscal-stress monitoring system. 5 The goal of this system is to identify 6 specific counties, cities, towns, and villages, and, 7 of course, school districts, that are in significant 8 stress or approaching stress, and to provide 9 information on the factors driving that stress to 10 local officials and taxpayers, so that an effective 11 plan to reverse the course can be developed. 12 The system uses 9 fiscal and 14 environmental 13 indicators. 14 The financial indicators are calculated using 15 the financial data already being reported by local 16 governments in their annual update documents, or 17 also known as their "AUDs," and school districts 18 in their annual financial reports, known as their 19 "ST-3s." 20 Examples of financial indicators include 21 changes in year or end fund balance, cash position, 22 short-term debt, et cetera; while environmental 23 indicators measure the external influences that are 24 often beyond the control of the community: 25 population changes, changes in poverty level, 1 property-value changes, et cetera. 2 Although each entity receives an overall 3 financial-indicator score and an 4 environmental-indicator score, it's the financial 5 indicators that are used to categorize each 6 jurisdiction into one of the three categories of 7 stress, and that is: Are there significant fiscal 8 stress, moderate fiscal stress, or susceptible to 9 fiscal stress? 10 An entity not in one of those stress 11 categories is deemed to have "no designation." 12 This system ensures that the level of fiscal 13 stress a municipality is facing -- this system 14 measures, I should say, the level of fiscal stress a 15 municipality is facing, and it does not measure the 16 level of fiscal health. 17 A municipality's absence from the stress in 18 one of our three stress categories should not be 19 viewed as a substantiation of good financial 20 condition by OSC; rather, it means that the 21 municipality is simply not displaying the levels of 22 fiscal stress, as defined by our system, to be 23 placed in one of those three stress categories. 24 The effort behind the development of the 25 system was substantial, and the research and 1 analytical process that moved it from concept to 2 completion was an inclusive one. 3 Our work was informed by a team of internal 4 experts with many years of relevant experience, 5 various local government stakeholders, the academic 6 community, and the general public. 7 After developing an initial draft of the 8 system, we instituted a 60-day comment period as a 9 way to solicit feedback. 10 We received and considered more than 11 100 comments before we finalized the system. 12 Moreover, the system built on already 13 accepted industry standards, and also reflects our 14 thorough review of systems by other states. 15 It's important to note that this system does 16 not require any new reporting requirements. 17 This bears repeating. 18 There are no new reporting requirements 19 necessary to support this fiscal-stress monitoring 20 system. 21 We utilize the elements of the financial 22 reports that local governments and school districts 23 already submit to OSC and the State Education 24 Department each year. 25 By taking this approach, we're able to 1 harness the power of data; data that is consistent 2 across units and over time. 3 As a result, the system will facilitate a 4 greater level of comparability and analysis. 5 We believe that this system will provide a 6 comprehensive, objective, and a comparative analysis 7 of the financial condition of each local government, 8 and in so doing, meet Comptroller DiNapoli's charge 9 to inform discussions among local officials, the 10 public, and state policymakers. 11 The first list of stressed municipalities was 12 made public in June of this year. 13 The initial fiscal-stress list was based on 14 financial information provided to our office by 15 local governments as of May 31, 2013, and includes 16 only municipalities with fiscal years ending on 17 December 31, 2012. 18 In New York, all counties, towns, 44 cities, 19 and 10 villages have a fiscal year ending 20 December 31st, for a total of 1,043 local 21 governments. 22 Two dozen of the local governments examined 23 have been designated as "fiscally stressed" under 24 our fiscal-stress monitoring system. The list 25 includes 8 counties, 3 cities, and 13 towns. 1 The municipalities found to be in stress 2 share a number of common characteristics, such as 3 low-fund balance, a continued pattern of operating 4 deficit, and inadequate cash on hand to pay their 5 bills. 6 In addition to the 24 fiscally stressed 7 municipalities, 18 local governments have been 8 listed as "under review" as we continue to have 9 their information vetted. 10 There are also 124 local entities that have 11 been designated as "have not filed"; meaning, that 12 they have yet to submit all of the information 13 necessary for the Comptroller's Office to make their 14 fiscal-stress assessments. 15 The remaining communities have been 16 classified as "no designation." 17 While we believe that our fiscal-stress 18 monitoring system will continue to provide valuable 19 new information immediately, we expect its value 20 will grow over time. 21 In future years, local officials and citizens 22 will be able to analyze changes in their community's 23 fiscal-stress picture over time. 24 That will add another level of insight to 25 what we consider an already rich source of useful 1 information into local governments' and school 2 districts' financial conditions. 3 In an address at the Rockefeller Institute of 4 Government in April, Comptroller DiNapoli said, 5 that, "The fiscal-stress monitoring system may 6 provide a painful wake-up call for some local 7 officials, and for many taxpayers who have not been 8 aware of the troubling financial realities facing 9 municipalities across the state." 10 The fact that each entity school will be made 11 public advances the Comptroller's goal of increased 12 transparency that will lead to greater public 13 awareness, and will provide an opportunity for local 14 officials to start planning openly and honestly. 15 We know that there are some communities where 16 local leaders have been engaging in this important 17 discussion and taking necessary actions for some 18 time. 19 The Comptroller has had numerous 20 conversations on this topic with many different 21 local leaders, including, for example, Mayor Miner, 22 and shares their belief that the State must continue 23 to do its part to help localities find and implement 24 real solutions. 25 Toward that end, Comptroller DiNapoli has 1 directed our agency to provide extensive -- an 2 extensive array of services for fiscally stressed 3 localities that choose to ask for our assistance. 4 These services will include an accelerated 5 risk assessment, budget reviews, audits, self-help 6 tools, a variety of training opportunities and 7 technical assistance for many of OSC's professional 8 team members. 9 Looking more broadly at the challenges facing 10 local governments, particularly our cities, the 11 Comptroller has suggested that, as additional 12 resources become available, the State should take a 13 fresh look at the level of general-purpose 14 assistance it provides. 15 A comprehensive agenda for local governments 16 should include both increased State assistance and 17 high-end-level accountability on the part of local 18 governments. 19 We are pleased that Moody's Investor Service 20 has said that the State Comptroller's system, which 21 helps local governments better identify their 22 financial troubles, is credit-positive. 23 Additionally, a number of local government 24 officials and experts have announced their support 25 for our early waring system. 1 This helps to validate our belief that more 2 information, even though sometimes difficult to 3 hear, will ultimately lead to better financial 4 policies. 5 As I stated before, analysis of the local 6 government fiscal stress is now -- is not new 7 territory for us. Quite the contrary. 8 The fiscal stress monitoring system is an 9 important step towards greater understanding at the 10 entity level. 11 Our interest in tackling this challenge 12 reflects a deep belief that taxpayers need and 13 deserve to have as much information as possible in 14 order to fully appreciate and evaluate the local 15 fiscal environment. 16 It is our sincere hope that such knowledge 17 will also help citizens manage their expectations, 18 and to articulate their priorities to local 19 government officials more effectively. 20 The fiscal-stress monitoring system should be 21 viewed as an essential tool to help policymakers and 22 the public engage in the difficult but necessary 23 conversations about the fiscal realities facing our 24 local communities. 25 In order to gain the maximum benefit from our 1 system, all effective parties must be willing to use 2 its reports to address any issues highlighted, 3 because knowledge without action is wasted. 4 Again, I'd like to thank you for the 5 opportunity to speak with you today, and we're happy 6 to answer any questions that you may have at this 7 time. 8 SENATOR MARTINS: Thank you. 9 Thank you very much, I appreciate that. 10 Senator DeFrancisco has questions. 11 SENATOR DEFRANCISCO: Yes. 12 I'm looking at this sheet of hundreds of 13 municipalities, and 99 percent of them either say 14 "no designation" or "not filed." 15 First of all, the "not filed," is there any 16 legal requirement that the missed -- that the 17 municipality submits anything to you? 18 NATHAALIE CAREY: Yes, they are legally 19 required to file their annual financial data with 20 the Office of the State Comptroller. 21 SENATOR DEFRANCISCO: And what is being done 22 for those who have not? 23 NATHAALIE CAREY: We actually have a process 24 to reach out to them. 25 Sometimes the "not filed" do file a little 1 bit late, sometimes due to different circumstances 2 at the local level. 3 But what we will do, if we have some 4 municipality that's chronically late: 5 We have, our legal team will reach out to 6 their attorneys; 7 We do send them update notices, to let them 8 know that they have not yet filed; 9 We will offer them technical assistance, to 10 see, maybe, if they need our office to help them 11 file. 12 SENATOR DEFRANCISCO: What's your drop-dead 13 date? 14 NATHAALIE CAREY: There is -- 15 SENATOR DEFRANCISCO: If you don't submit it, 16 that you're going to do something. 17 And, secondly, what can you do? 18 NATHAALIE CAREY: There is absolutely no 19 drop-dead date. 20 In terms of, they are legally required to 21 file within 120 days, maximum, of the end of their 22 fiscal year. 23 And, although we do have the ability to, 24 potentially, sue the municipality and collect $5.00 25 a day, that is not something that the 1 Comptroller's Office practices at this time. 2 SENATOR DEFRANCISCO: Okay, so if someone's 3 really in trouble, and they don't want to show that 4 because of an election year, or something, they can 5 just not file for three or four years, if -- 6 NATHAALIE CAREY: Well, one of the things 7 that's happening now with our fiscal-monitoring 8 system, is that, for the first time, we are, 9 actually, publicly displaying who has not filed. 10 This has cast a spotlight on that category. 11 And in recent times, we have seen a huge drop 12 down in the number of municipalities that have not 13 filed. 14 So, when we do our update to this list, we 15 will be able to show that there has been a 16 significant reduction in that number, hopefully. 17 SENATOR DEFRANCISCO: Okay, but a lot of 18 these, most of them are "no designation," which 19 means they're not under any distress? 20 NATHAALIE CAREY: Right. 21 Only 24 of the municipalities -- only 24 of 22 the 1,043 municipalities that we have reviewed at 23 this time have shown to be in one of our three 24 levels of stress. 25 SENATOR DEFRANCISCO: All right, and -- 1 ROBERT B. WARD: And, Senator, I don't think 2 we would say that that means they're not under any 3 stress. 4 I would just like to clarify that. 5 Clearly, many municipalities have varying 6 levels of difficulty or challenges that they're 7 facing. 8 We chose the phrase "no designation" to refer 9 to the fact that, within our particular system, and 10 scoring system, if you will, that they did not rise 11 to a level that the others did. 12 SENATOR DEFRANCISCO: Well, there's some 13 designation, "susceptible to fiscal stress." 14 NATHAALIE CAREY: Uh-huh. 15 SENATOR DEFRANCISCO: If they're not 16 susceptible to fiscal stress, and they have no 17 designation, then they should be in good shape. 18 NATHAALIE CAREY: Not clearly. 19 And I'd like to point it out as a continuum. 20 So, we really struggled with trying to ensure 21 that we did not come out and say that we were 22 measuring the fiscal health; so if you're not in 23 stress, then you're in "healthy," and you're in good 24 shape. 25 Because the cut-off point to reach our 1 "susceptible" level is 45 percentage of the points. 2 Now, if you're at 44 percent, or if you're at 3 1 percent, we didn't want to lump you all into a 4 category and say, "Well, you're fiscally healthy," 5 because there are some that are closer to one of our 6 fiscal-stress categories than others. 7 So that's why we listed every single 8 municipality, and also provided the correlating 9 fiscal score, because, although they did not rise, 10 under our conditions, to be in one of our three 11 levels, some are closer than others. 12 ROBERT B. WARD: I think another point that's 13 important, is that the -- the scores are as of a 14 moment in time, when, at the most recent time, that 15 the municipality's filed their AUD. 16 In many cases, we're quite aware of 17 jurisdictions that, as they look ahead to the next 18 year, or a couple of years down the road, and see 19 that their fund balance may be declining, for 20 example, or, other indicators of trouble to come are 21 on the horizon, that that is very important to 22 recognize. But it may not indicate that, as of the 23 date of the data that -- that we're examining here, 24 that they were in significant stress. 25 SENATOR DEFRANCISCO: I understand, but what 1 I -- I'll leave it at this: 2 But if you've got numbers that show, maybe, 3 this is your level for fiscal distress, and it's 4 50 -- or, "susceptible to fiscal distress." 5 Here's one, 54.6. 6 And then you have a designation -- 7 "no designation" for something that's 41.3 percent, 8 to me, that sounds that they're approaching some 9 type of problem. 10 Does it make any sense to have designation, 11 "no designation" and "susceptible to fiscal 12 distress"? 13 Wouldn't people in the 40, to 45, or 35, 14 wouldn't they be susceptible if they have that high 15 a number? 16 NATHAALIE CAREY: Well, again -- 17 SENATOR DEFRANCISCO: It seems like the 18 categorization is something that is misleading, is 19 what I'm saying. 20 NATHAALIE CAREY: We don't -- again, for our 21 purposes, what we wanted to show, is that some 22 communities are at a particular point now where they 23 need to have special attention. 24 A line -- of course, any time you draw a 25 bright line, there's going to be someone that falls 1 below and immediately, and some that are going to be 2 within. 3 So from our perspective, when we looked at 4 "no designation," it's a gradient. 5 So, as you get lower to the end, it's a 6 lighter gradient. And as you get higher, it gets a 7 little bit darker. 8 We did not want to lump everyone in that 9 particular category and say they're healthy, 10 because, as I stated, some of them are closer to the 11 line than others. 12 So, still having the categories there, but 13 placing their numbers and showing you their scores 14 allows to you come to your own determinations. 15 SENATOR DEFRANCISCO: Okay, I understand what 16 you're saying. 17 I don't agree with you, but I understand what 18 you're saying. 19 The second point is: I was looking for 20 Syracuse. They have a fiscal year ending on 21 December 31st. 22 Have they been evaluated? 23 NATHAALIE CAREY: No, they don't -- the 24 fiscal year-end for Syracuse -- we haven't evaluated 25 Syracuse at this point. 1 Their fiscal year-end is in June; right? 2 SENATOR DEFRANCISCO: Oh, it's in June? 3 NATHAALIE CAREY: Yes. 4 SENATOR DEFRANCISCO: Then I forgot. 5 I thought it was the what is 30th -- I 6 thought it was the end of the year. 7 Okay, fine. 8 And, lastly: You indicate that these -- one 9 of the -- the only solution I heard you say, towards 10 the end of your speech, was that, if funding becomes 11 available, there should be more aid to localities. 12 Isn't that what you said? 13 NATHAALIE CAREY: We believe that aid to 14 localities is something that the State must 15 consider. 16 SENATOR DEFRANCISCO: Okay. 17 ROBERT B. WARD: And the Comptroller has also 18 said that the purpose of this system is to engender 19 discussions in every municipality throughout the 20 state, because the -- most of the choices have to be 21 made at the local level. 22 SENATOR DEFRANCISCO: Okay. 23 Other than suggesting more funding, if the 24 funding is available, were there any other 25 recommendations that came out the 1 Comptroller's Office, based upon the things that you 2 observed that were common to many cities or villages 3 or towns? 4 NATHAALIE CAREY: The Comptroller's Office, 5 we've offered a number of recommendations in terms 6 of dealing with this, of course. 7 But at the local level, we've -- as Bob has 8 discussed, local officials are going to have to make 9 tough decisions. 10 I mean, at the end of the day, revenues are 11 not keeping paces with expenditures. 12 So the first issue is: What can you do on 13 the expenditure side? 14 We have found, for the last couple of years, 15 that expenditures have been increasing at a much 16 lower rate than years prior, so we do believe the 17 localities are trying to address their expenditure 18 issues at this point, but now that also becomes 19 difficult because the revenues are becoming even 20 more constrained. 21 So in terms of what can be done, again, we 22 point out that there's no one solution here. 23 We're not saying that, as has been stated, 24 throwing more money at the problem is going to make 25 it go away, because that isn't the only solution, 1 but we do have to make sure that everything is on 2 the table. 3 One of the things that we're suggesting for 4 local governments is additional multi-year financial 5 planning. That is something that we have been out 6 there promoting. 7 They need to understand their financial 8 picture. They need to understand the assumptions 9 that they're making, and where those assumptions are 10 going to take them in the future. 11 In addition to that, one of the legislative 12 agenda items that Comptroller DiNapoli has tried to 13 advance, is allowing localities to legally set money 14 aside in a trust for their OPEB liabilities. 15 Of course, as you know, they have to carry 16 this information on their balance sheets now, and 17 they still don't have a legal way of being able to 18 save that -- you know, for that money. We're still 19 on a pay-as-you-go program. 20 So there are a number of different things 21 that we can try to do to assist localities, but at 22 the end of the day, it does come down to local 23 officials making very difficult decisions. 24 SENATOR DEFRANCISCO: And they know they all 25 have difficult decisions. 1 I bet you everybody here will know that. 2 And what I -- if you do have a list of 3 recommendations, one of which you suggested makes 4 sense, a trust to put money away, for example, for 5 pensions, or whatever it might be, if you have a 6 list of other suggestions as to some of the menu 7 that the local officials can -- might want to 8 consider, I'd like to see -- if we can be provided 9 it, that would be great. 10 NATHAALIE CAREY: Okay. 11 SENATOR DEFRANCISCO: Thank you. 12 ROBERT B. WARD: Senator, if I can just make 13 one follow-up point on the issue of where to draw 14 the lines as to whether a jurisdiction is in stress 15 or not, we think it's -- it's -- one of the 16 important results of this will be that, in the 17 future, from year to year, people can look at how a 18 jurisdiction's number has changed from the previous 19 year. 20 So, for example, if a municipality is -- gets 21 a score of 20 this year, and then next year it's -- 22 the number is 30, that tells us something important, 23 even if they still might be below the level where 24 they are designated as "being in stress." 25 SENATOR DEFRANCISCO: I agree with you 1 entirely. 2 My only point was, this imaginary number of 3 50-point-whatever percent, you're susceptible, and 4 then you go down to 49 and you're not, the raw 5 numbers will tell a better picture than some 6 artificial line that might be misleading to those 7 who haven't been given a "susceptible distress" 8 rating. 9 That's all I'm saying. 10 ROBERT B. WARD: Okay, thank you. 11 SENATOR MARTINS: Senator Valesky. 12 SENATOR VALESKY: Just to kind of follow up 13 on one of Senator DeFrancisco's points, in terms of 14 going forward, and what the Comptroller is 15 recommending, and you include -- and you talk about 16 if additional assistance for localities becomes 17 available, you talk about a heightened level of 18 accountability on the part of local governments. 19 I did not hear or read any recommendations in 20 regard to consolidation of local governments, 21 sharing of services between local governments. 22 And I'm curious to know if, in fact, the 23 Comptroller has a position on that issue, and what 24 those recommendations, in fact, might be. 25 NATHAALIE CAREY: In terms of shared 1 services, not only does Comptroller DiNapoli have a 2 recommendation, but he has a training program that 3 is available to all local governments and 4 municipalities. 5 We have an extensive training program on 6 shared services that helps them to determine the 7 true cost of services, because, of course, that is 8 one of the major issues. 9 We try to educate that determination. 10 And in a sense, what Comptroller DiNapoli has 11 always stated, that that is a local decision. It's 12 a grassroots determination that has to be made at 13 the local level. 14 And if they have decided that they want to 15 share services, or even do consolidation, or there 16 are dissolution discussions, nine times out of ten, 17 there are financial pictures that need to be drawn. 18 We need to understand some of the issues, some of 19 the legal matters. 20 And our office has oftentimes been a, you 21 know, resource for local governments to utilize. 22 So, consolidation, shared services, are 23 another part of the thought process behind what 24 local governments can do, if they themselves choose 25 to, in order to address some of their financial 1 issues. 2 SENATOR VALESKY: Thank you. 3 SENATOR MARTINS: Thank you. 4 Just a couple of questions. 5 When you mentioned that there were 6 300 municipalities in New York State that were 7 unable -- or, that ended the year in deficit, I'm 8 assuming that those 300 also dipped into their 9 unreserved fund balances to cover those expenses. 10 Was that the experience? 11 NATHAALIE CAREY: I can't say that with all 12 accuracy, but more than likely, that would have been 13 the case. 14 SENATOR MARTINS: And as those fund balances 15 go down, those fund balances, essentially, for those 16 of us who speak in layman's terms, that's a 17 rainy-day fund; right? 18 NATHAALIE CAREY: Yes, absolutely. 19 SENATOR MARTINS: And, so, if it's raining 20 outside, you want people to dip into those rainy-day 21 funds. 22 And the idea of artificially maintaining a 23 high reserve just for the sake of meeting a 24 criteria, when it is raining outside, and we do have 25 to get through some rough patches, it's to be 1 expected, isn't it, during these tough economic 2 times, that they would dip into those reserves? 3 NATHAALIE CAREY: Absolutely. 4 And, in fact, I think that that is one of the 5 things that kind of tells us the type of environment 6 that local governments are operating in right now. 7 So, yes. 8 And in certain cases, when you see -- one of 9 the things that our system points out is that, 10 truly, your budget is only as good as your ability 11 to deal with -- your financial solvency, I should 12 say, is only as good as your ability to deal with an 13 unexpected circumstance. 14 So one day it will rain, and one day you will 15 need those funds to deal with the rain or to weather 16 that storm. 17 In these recessive times, of course, the 18 storm has lasted a little bit longer than we like to 19 see, and so we've seen municipalities really having 20 no other choice than to dip into these fund balances 21 in order to make ends meet. 22 SENATOR MARTINS: I appreciate that. 23 You know, as we look at the aftermath of 24 Detroit, and look at the lessons and various models 25 for different states across the United States, as 1 they tackle the issue of fiscal stress and 2 municipality bankruptcy, or the potential of 3 bankruptcy, there are different models out there. 4 And I happen to be a firm believer that 5 municipal bankruptcy is not an option. 6 So, the idea of having a fiscal-stress 7 monitoring system that allows for an 8 early warning-type system is something that 9 I welcome as the State seeks to provide either 10 guidance or intervention to avoid municipalities 11 being left with no other option other than to seek 12 bankruptcy. 13 But as you mentioned earlier, the 14 Comptroller's Office does perform audits across the 15 state, does audit our local governments. 16 And in doing so, certainly, we have heard 17 from our local governments that there are a number 18 of stress points that they have felt, certainly over 19 the last couple of years, that have really put a 20 tremendous amount of stress on their budgets; things 21 like pension costs, things like health-care costs. 22 And I would assume that, through your audits, 23 you have seen the pressure points that have been 24 placed on local municipalities, and can, perhaps, 25 provide us with what Senator DeFrancisco had asked 1 for, those suggestions and recommendations as a 2 means of us being able to, not only to identify 3 those pressures points, but coming up with solutions 4 to alleviate those pressure points, because it's not 5 just enough to identify them. 6 We can all talk about pensions, but we have 7 to do something about it. 8 We can all talk about increased health-care 9 costs, but we have to do something about it. 10 Are there recommendations that the 11 Comptroller's Office has with respect to handling 12 these issues specifically, and others that you may 13 have come across? 14 NATHAALIE CAREY: And we actually -- that's a 15 great opportunity for us to plug an upcoming 16 research report that we will be releasing. 17 Now that we have implemented the 18 fiscal-stress monitoring system, one of the things 19 that it allows my research team to do, is to review, 20 not only the common factors that we're seeing across 21 the municipalities that are listed "in stress," but 22 also trying to figure out what are the best coping 23 mechanisms that may be out there for those 24 particular municipalities. 25 Of course, municipalities are very unique. 1 They have different drivers and different 2 circumstances. 3 So even as we look at the fiscal-stress 4 score, it's a number. It's a standardized number 5 that is applied with a formula to every single 6 municipality. 7 When you speak to these municipalities, they 8 will all tell you that they have a unique story -- 9 some large industry that has lost recently, some 10 huge population loss that they have seen -- that's 11 helped driving these numbers that we don't 12 necessarily get to by giving them the standardized 13 approach. 14 That being said, it allows us to start having 15 those discussions, and asking the questions about 16 what it is that they're seeing. And, also, maybe 17 doing some reports to say, if we see these practices 18 happening here. 19 And going back to the example that Bob 20 provided, the value of the system, really, is over 21 the years. 22 So if you see a municipality approaching 23 stress now, can we do something to avoid that? 24 But, conversely, if we see be a municipality 25 that is moving away from stress, what are they 1 doing? 2 What are the best practices that we can learn 3 from that municipality, to share with others, 4 hopefully, to help them see the same results. 5 SENATOR MARTINS: No, I appreciate that, and 6 I do agree with you, but there are broad-stroke 7 issues that apply to every municipality in 8 New York State, and there are individual, I guess, 9 stress points for individual municipalities that are 10 unique to that municipality. 11 And, so, to the extent that we can, at the 12 state level, address the broader-stroke issues, I 13 think it's important. 14 I also happen to believe that the approach 15 that the State has taken with respect to those 16 communities that have, historically, or in the past, 17 been identified as being distressed has been 18 appropriate, because their -- control boards have 19 been approved and put in place specifically to deal 20 with individual communities, as opposed to taking a 21 broader-stroke approach. 22 So as we deal with the individual 23 municipalities through that approach, I think it's 24 important, and I would ask, if there are 25 recommendations that the Comptroller's Office has 1 for us with respect to those broader-stroke issues, 2 from a practical standpoint, if you could provide 3 those, we could certainly provide those to our local 4 municipalities, and provide an addendum to this 5 hearing for those items as well. 6 NATHAALIE CAREY: And just to be clear: 7 Our research report is more broad-stroke 8 issues. 9 Our fiscal profiles have been more of the 10 unique identifiers. 11 So, the research report that we are hoping to 12 come out with in the near future will be the 13 statewide issues that we're seeing. 14 And then we have these individual fiscal 15 profiles, that I also discussed in my testimony, 16 that really talks about some of the individuals. 17 So we hope that that will be able to address 18 the issue that you just raised. 19 SENATOR MARTINS: Thank you. 20 NATHAALIE CAREY: No problem. 21 SENATOR MARTINS: Senator DeFrancisco, 22 anything else? 23 SENATOR DEFRANCISCO: No. 24 SENATOR VALESKY: No. 25 SENATOR MARTINS: Thank you very much. 1 ROBERT B. WARD: Thank you, Senators. 2 SENATOR MARTINS: And our regards to the 3 Comptroller. 4 Next witness this morning is 5 Mayor Stephanie Miner. 6 Mayor, thank you for your hospitality. 7 MAYOR STEPHANIE MINER: Well, 8 Senator Martins, welcome to Syracuse. 9 SENATOR MARTINS: Thank you. 10 MAYOR STEPHANIE MINER: We're glad that 11 you're here on an issue that is near and dear to my 12 heart. 13 So, also, thank you to the two gentlemen who 14 are no strangers to Syracuse, or to me, 15 Senator DeFrancisco and Senator Valesky, of course. 16 We had given you kind of an expanded prepared 17 testimony, but rather than read that testimony, 18 I thought it would -- might be a little bit more 19 enjoyable if I spoke extemporaneously, and then the 20 actual documentation of what I'm going to speak 21 about -- 22 SENATOR MARTINS: Bless you. 23 MAYOR STEPHANIE MINER: -- is in those 24 remarks. 25 So let me begin, in addition to welcoming 1 you, by saying that this is an issue, 2 Senator Martins, and I know you, in particular, have 3 done a great deal of work on. And in my work that 4 I've been doing on it, I have seen your name on a 5 number of bills, and I appreciate a fellow soldier, 6 if you will, in this. 7 (PowerPoint presentation begins.) 8 This is an issue that is going to, in the 9 very near future, impact every single municipality 10 in the state of New York, and also impact school 11 districts as well. 12 And it has always been my philosophy, that 13 when you recognize a problem, you should solve it 14 when you recognize it. 15 And that is a little bit different, I have 16 discovered, from other political philosophies who 17 tend to say, Well, let's solve that problem when it 18 becomes a full blown-out crisis. 19 And the problem with doing that, is that if 20 you wait for the full blown-out crisis, your options 21 are severely narrowed. And when your options are 22 narrowed, the people that we are all elected to 23 serve suffer. 24 So, that, let me talk about Syracuse in 25 particular. 1 You will see here on this first chart that 2 what we have is our budgeted expenses for 2013 and 3 '14. 4 And I use that chart to show you that the 5 overwhelming portion of our budgeted expenses are 6 personnel and labor costs. 7 Again, no surprise to anybody who is familiar 8 with the city budget. 9 That "Other Operating Expenses" that you see 10 there, that $64.3 million, that's where we do all of 11 our work. That's buying salt, buying trucks (fire), 12 buying replying police cars, buying gas...all of 13 those kind of other things. 14 Next chart. 15 This is a further breakdown. 16 The single largest expense that we have are 17 wages. 18 And when you break down your wages, you can 19 see that the single -- the two biggest pieces of 20 those wages are police and fire. 21 And that is important, because police and 22 fire are subject to binding-interest arbitration, 23 which means that we have, effectively, no control 24 over those salaries. 25 So a significant portion of our city 1 expenses, we don't have any control over. 2 In addition, I would loop in health care into 3 that, because the health-care expenses that are 4 associated with police and fire are also part of 5 binding-interest arbitration. 6 This next chart kind of shows you one way to 7 see the benefit of binding-interest arbitration. 8 You will see in the "Other Employees," who 9 are organized and members of a union that we bargain 10 with, as well as a small portion who are not 11 organized, you can see the growth in wages and 12 overtime, from a 10-year period, has been 13 32 percent. 14 And with police -- police and fire, you can 15 see a much more significant raise in those growth of 16 wages and overtime. 17 And, again, with police and fire, we just 18 simply have no ability to effectively control that. 19 This is another way for you to look at our 20 growth and overtime, and what has happened. 21 Now, some of that fire growth and overtime 22 has been because we have not hired as many 23 firefighters. 24 And -- but as a consequence of, up until last 25 year of having a bargain for a minimum staffing 1 requirement, we had to backfill those positions with 2 overtime. 3 You mentioned earlier, pensions, as one of 4 the issues that you hear a cry from all 5 municipalities. 6 This chart shows you our incredibly 7 exponential growth in pensions. 8 And, again, pensions are something that we 9 have no control over. 10 The benefits are set by the State, and we get 11 a bill -- we get an estimated bill, and then we get 12 a final bill, and then we're expected to pay for it, 13 but, it is nothing that we can control. 14 This is another way of showing you that the 15 lion's share of our pension invoices are police and 16 fire costs. 17 The "dark blue" are police and fire. 18 And the "Other" are all other employees. 19 So, you can see that police and fire, in 20 particular, are very rich benefits. 21 Next, as you also mentioned, health care. 22 We actually have kind of a double-whammy here 23 in the city of Syracuse, in that, our 24 health-insurance expenses are growing exponentially, 25 and at the same time, we have become what is 1 colloquially referred to as "upside down." 2 We are paying more and insuring more retirees 3 than we are active employees. 4 Now, part of that is a sign of strong 5 fiscal-responsibility management, because we simply 6 have fewer employees than we once had. 7 But the other part of that shows these 8 "legacy costs," something -- a phrase that became 9 very familiar among -- when people are talking about 10 car manufacturers. 11 These are real legacy costs. 12 And because the lion's share of them are 13 police and fire retirees, again, binding-interest 14 arbitration, and some of the benefits that were 15 negotiated, we can't control those as well. 16 This is -- shows you a 128 percent growth in 17 health-care costs. 18 Next. Sorry. 19 And this will give you, I think, a real sense 20 of what that means. 21 So, for police-family coverage, active family 22 coverage, they are currently paying $60 a month. 23 That means they are paying 4 percent of their 24 premium-equivalent, because we are self-insured, 25 which means that the taxpayers are paying 96 percent 1 of the bill for that. 2 That is not in line with what other 3 governments are paying. 4 And it is also, clearly, not in line with 5 what the private sector is paying. 6 And so you can see, for family coverage, for 7 the police officer, it costs us just over $17,000 a 8 year, and the police officer is paying $720 a year. 9 And that continues to grow between -- 10 anywhere between 3 and 5 percent a year. 11 And when we say to the police union that we 12 want to negotiate over those costs because those 13 aren't equitable, they effectively say to us, 14 We don't have to negotiate it, and we're not going 15 to negotiate it. 16 Here are -- I want to talk about our 17 single -- our second-largest revenue source, which 18 is State aid. And you can see that we've had almost 19 a 10 percent drop in State aid since 2008. 20 In 2012 and 2013, due to the hard work of 21 both Senators sitting on the right and left to you, 22 literally, and figuratively, as well as the 23 Assembly, we were able to get a spin-up. And you 24 can see that number in 2012 and 2013. 25 We took that spin-up and put it right into 1 our fund balance, and used the money to pay our 2 pension costs. 3 But as you can see, State aid has been flat, 4 if not -- and reduced, going back. 5 In 2010, which was my first year in office, 6 I was able to negotiate with the -- with 7 Onondaga County. And, again, with the help of the 8 gentlemen to the right and left of you, as well as 9 the Assembly, a new sales-tax formula, which 10 benefited the city of Syracuse. 11 So, you can see that we have gotten almost 12 21 percent more revenue since we renegotiated that 13 sales-tax formula. 14 We have also, on our own, done a number of 15 cost-cutting measures. 16 And while everybody likes to talk about 17 elected officials making hard choices, the reason 18 that elected officials don't make hard choices is 19 because there are really hard consequences often to 20 those choices. 21 But we in the city of Syracuse, under the 22 category of "self-help," have done a number of 23 things that have disrupted the status quo, that have 24 been very difficult; yet, we're committed to doing 25 what we need to do to be fiscally responsible. 1 And, so, we have -- I have negotiated -- I'm 2 the first mayor in the state of New York to have 3 negotiated service agreements with three of our 4 largest nonprofits. 5 The city of Syracuse has more than 50 percent 6 of its property is non-taxable. 7 And the largest engine of economic 8 development that we have, are our institutions of 9 higher learning and health care. 10 And it is terrific, because they are 11 making -- they're growing by leaps and bounds, and 12 those are great jobs, and those are jobs that are 13 not going to get up and move to South Carolina. 14 But the other downside is that, while those 15 jobs produce additional income taxes, they don't 16 produce property taxes. And those are people that 17 deserve and need and require expensive city 18 services. 19 Police, fire, and as I always say, near and 20 dear to our heart here in Syracuse, snowplowing, all 21 very expensive. 22 So we have negotiated service agreements with 23 three of our largest nonprofits. We're continuing 24 to have those discussions; 25 We have reduced our workforce by 10 percent; 1 We have reduced police and fire overtime 2 where we could; 3 We have relocated a senior center; 4 We have negotiated zero increases with the 5 unions that we could; 6 We have increased health-care contributions 7 for our management-confidential employees; 8 And we have also negotiated some health-care 9 increases with some of our smaller unions. 10 This is, by no means, an encompassed list. 11 This is just a list that we had, and it's part of 12 your packet. 13 SENATOR VALESKY: Mayor, can I just interrupt 14 you for just one second? 15 MAYOR STEPHANIE MINER: Sure. 16 SENATOR VALESKY: I know we typically don't 17 do this, but while you have this slide up, I just -- 18 you had indicated, negotiated zero increases with 19 six labor contracts with the labor unions that you 20 could negotiate with. 21 MAYOR STEPHANIE MINER: Right. 22 SENATOR VALESKY: What does -- 23 MAYOR STEPHANIE MINER: That means, police 24 and fire, I could not, because -- 25 SENATOR VALESKY: With the -- all other 1 bargaining units, with the exception of police and 2 fire? 3 MAYOR STEPHANIE MINER: There may be a couple 4 of small ones that we are still negotiating with, 5 but, police and fire dismissed it out of hand. 6 Yep. 7 And so, as I said, this is, by no means, an 8 exhaustive list, but it is a list that we have put 9 together. 10 We have been focused on continuing to provide 11 high-quality service by doing it in the most 12 innovative ways that we can, and that includes 13 engaging in consolidation and shared services with 14 Onondaga County. 15 This chart here, I think, is probably the 16 most telling chart about what we have done as a 17 city. 18 The darker -- when I came into office in 19 2010, I put together a fund-balance projection. 20 I am not an actuary by any stretch of the 21 imagination. And, for me, sometimes the easiest way 22 is to just do it the bluntest way as possible, is 23 the analysis. 24 So, when I came into office, I put together a 25 fund-balance chart, and said: If we were to 1 continue to spend everything the same, where would 2 we be? 3 And what you will see, the "red line" is the 4 Comptroller's minimum fund-balance guideline. 5 And what I saw was, in 2013 and '14, the year 6 that we are presently in, we would drop below that 7 red bar. 8 And, so, it was very clear to me at that 9 point that we had to start doing things in a very 10 fast pace. 11 At the same time -- so, what you see in the 12 lighter-shade blocks up above, is what I would say 13 is the accomplishments of my administration in 14 saving fund-balance money. 15 But that's -- you know, that accomplishment 16 is not permanent, because you can see that that 17 fund-balance guideline drops down. 18 And, again, this is if all things stay the 19 same. 20 And, in government, and with my 21 administration in particular, that never happens. 22 But, I use this to say to you a couple of 23 things. 24 We have done extraordinary work in the city 25 of Syracuse, in terms of cost-cutting, and being 1 innovative and delivering services. Very hard 2 political decisions that have been made. 3 And, so, we're sort of out of rabbits that we 4 can pull out of our hat, unilaterally, to help save 5 us. 6 When you look at what is driving us to that 7 point, it is very clearly, pensions, health-care 8 costs. And then, when you break that down, it is 9 the labor costs of units that have the benefit of 10 binding-interest arbitration. 11 And so, very early on, I also started talking 12 about the fiscal crisis that was going to impact 13 municipalities. 14 And, candidly, didn't get much attention 15 until, about two years ago, when you started seeing 16 municipalities really making very difficult 17 decisions. 18 And as a consequence of that: 19 And now, of course, on the national stage, 20 Detroit. 21 There was an article on the front page of the 22 "New York Times" last week, about the city of 23 Philadelphia, which has to borrow to keep its school 24 districts open, but has no plan to pay that 25 borrowing back. 1 Chicago's pension fund is going to run out of 2 money next year. 3 We've seen what's happened with cities in 4 California. 5 Last summer, the city of Scranton, just down 6 the road in 81 -- Route 81, had to pay its police 7 and fire minimum wage because they ran out of money. 8 This is going to happen. 9 It's not a question of if, it's a question of 10 when. 11 And every mayor and county executive that I 12 know, and I've spoken to, says: We need the State's 13 help to help prevent the kind of harm that we're 14 going to see happen to the people of Detroit 15 happening to the people of Syracuse and other cities 16 in New York. 17 So, with that, I'd be happy to answer any 18 questions that you have. 19 SENATOR VALESKY: Thank you, Mayor. 20 Certainly, let me tell you how much 21 I appreciate the efforts of you and your 22 administration in terms of the rabbits that you can 23 control unilaterally. 24 Just a couple of thoughts on the two major 25 issues, which I think you made very clear, once 1 again, the issue of pensions and health care. 2 I don't know whether you have specific 3 recommendations here today for us, but, in regard to 4 pensions, for example, you know, I certainly 5 understand the Tier 6 issue is not going to help 6 your city until you are able -- if, and when, you 7 are able to start hiring new employees. 8 That's pretty obvious. 9 The pension-smoothing law that we enacted 10 earlier has positives and negatives. 11 So, I'm wondering what else we can and should 12 be doing on the pension side. 13 On the health-care and labor costs, as you 14 know, and we spoke a number of times, in regard to 15 the new board that we established, we did, and 16 I understand it doesn't -- it -- the timing of the 17 new state law, in terms of binding-interest 18 arbitration, doesn't necessarily help the city in a 19 current situation, but, going forward, I think we've 20 made very clear in the state law that a 21 municipality's ability to pay should be of some 22 assistance. Perhaps only time will tell the level 23 of assistance that that will provide. 24 So, I guess -- and, again, if you don't have 25 that here today, that, obviously, is understandable, 1 but, we will simply be looking forward to, and it's 2 certainly part of the purpose of you doing these 3 hearings, Mr. Chairman, as we prepare for our next 4 legislative session in January, additional 5 suggestions from you and your colleagues across the 6 state of what more, in fact, we should be doing. 7 Because I think all three of us, and I think 8 your entire Committee, Senator Martins, is anxious 9 to be at the forefront, and aggressive, in doing 10 what we can to make sure that our state doesn't 11 follow the example of the state of Michigan, which 12 didn't do a whole lot of anything, I guess, I think 13 it's fair to say, in regard to the Detroit 14 situation. 15 MAYOR STEPHANIE MINER: Well, I want to thank 16 you, and I say "you" as a body, for an acting the 17 new tension tier. That's certainly going to help in 18 the future. 19 And for also recognizing that there needed to 20 be some changes in binding-interest arbitration. 21 But you can see from this chart, we don't 22 have a lot of time. 23 And Syracuse is one of the betterly -- excuse 24 me, that's not a word. 25 Syracuse is -- has been very well managed, 1 fiscally, and so we're in better shape than most 2 municipalities are. 3 But as I said, as the leader, as the mayor of 4 the city, I recognize that this problem is coming. 5 So I would suggest, and kind of following on 6 what the Comptroller said, that you would ask the 7 major municipalities in your districts to give you a 8 four-year projection. 9 Just a four-year projection of where they 10 are, and you will see that they all hit the wall 11 within that four years. 12 And then recognize that this burden should 13 not be borne exclusively by retirees, exclusively by 14 taxpayers, exclusively by active workers. 15 It should be borne by all of us, which means 16 that there has to be a conversation where we are all 17 brought together to talk about: How is it that we 18 can make a very difficult situation the best 19 possible for our constituents, before crime rates, 20 you know, spiral out of control, before fires don't 21 get put out, before all of those kind of things that 22 we are seeing happening, not only in Detroit, but in 23 San Bernardino, California, and Stockton? 24 There are -- you know, there are issues. 25 The Lundine Commission, which happened, I 1 think, in the '90s, came up with a recommendation 2 which said the State has in its authority, to 3 mandate a percentage of health-care contributions. 4 That would go a long way in helping. 5 You could also say, allow municipalities the 6 ability to charge nonprofits a service fee for 7 services that institutions utilize that currently 8 don't pay for it. 9 So, we cannot put a service fee on 10 nonprofits; and, yet, they need, require, deserve, 11 our most expensive services. 12 If you were to enable us to have that kind of 13 authority, that's a discussion that we could have, 14 and then look at it on a local level. 15 SENATOR VALESKY: I'm sorry to interrupt, but 16 that is part of what you have already been doing, is 17 it not, with Syracuse University, with some of the 18 hospitals that you referred to. 19 MAYOR STEPHANIE MINER: Yeah, but they 20 have -- Senator, we have been doing that through the 21 enlightened leadership of the institutions on the 22 other side of the table. 23 And there are a number of institutions on the 24 other side of the table who have said: We're not 25 going to have this discussion with you. We're not 1 interested in talking about this. 2 And other than a bully pulpit, which I have, 3 and use, there's not much else we can do about that, 4 although, we're continuing to pursue that. 5 You know, my good friend 6 Lieutenant Governor Ravitch breaks it down pretty 7 simply. 8 He says, "Look, you got to either raise 9 revenue or you got to lower your liabilities, and 10 it's that simple." 11 So when you look at what our liabilities are, 12 there are liabilities, with all due respect, that 13 you have given us. 14 And as a consequence of that, I believe, and 15 I'm saying, that you have ownership in trying to 16 help us solve these problems. 17 SENATOR DEFRANCISCO: We haven't negotiated 18 too many city contracts, have we, from the State? 19 MAYOR STEPHANIE MINER: No, you haven't. 20 SENATOR DEFRANCISCO: Okay. 21 But I understand exactly what you're saying. 22 We've had this discussion many times before. 23 Have you ever -- have you explored the 24 legality of the State Legislature allowing for 25 fee-for-services of non-for-profits? 1 MAYOR STEPHANIE MINER: Yes, I have. 2 SENATOR DEFRANCISCO: And do you have any -- 3 do you have a legal opinion on that? 4 MAYOR STEPHANIE MINER: Yes. 5 The Comptroller's Office says that we cannot 6 render a fee for what is -- what I will 7 characterize, as "general basic municipal services." 8 So, we can render a fee for a specialized 9 service, like a lighting district. 10 But for general everyday services, the meat 11 and potatoes -- police, fire, sanitation, DPW -- 12 which is where our costs are all going, we cannot do 13 that. 14 SENATOR DEFRANCISCO: All right, and we -- 15 MAYOR STEPHANIE MINER: And, Senator, if 16 I may just follow up with this: Really, in Albany 17 in particular, what you've seen happen, is that the 18 city of Albany has negotiated pilot agreements with 19 the State of New York for that purpose. 20 SENATOR DEFRANCISCO: And do you -- have you 21 had any legal opinion as to whether the State can, 22 constitutionally, charge -- allow for the cities to 23 charge a fee for whatever services you provide? 24 MAYOR STEPHANIE MINER: I'm told that, yes, 25 they can. 1 SENATOR DEFRANCISCO: And if you can get that 2 to me, that would be really helpful. 3 MAYOR STEPHANIE MINER: Sure. 4 SENATOR DEFRANCISCO: So that's one area. 5 There have been many -- I know the assessor's 6 office here used to challenge, quite frequently, 7 nonprofit status of organizations, because a 8 nonprofit may own a building and rent it out for a 9 for-profit, or whatever. 10 What is being done by your city with respect 11 to making sure a nonprofit is truly a nonprofit and 12 not making dollars -- making income when they claim 13 to be a nonprofit? 14 MAYOR STEPHANIE MINER: Well, we chase them, 15 and we ask them to produce documentation. And, 16 then, we fight them all the time. 17 And that, too, is getting harder and harder, 18 because lawyers are paid to be clever, and they will 19 say: We're providing housing for students; and so, 20 therefore, that's a nonprofit mission; and, 21 therefore, we shouldn't pay property taxes. 22 So we have an assessment department that 23 looks at these, looks at missions. 24 But part of our issue, too, is that our 25 assessment department is a fraction of what it was 1 ten years ago, because we have had to cut costs. 2 And, so, there is a rotating group that our 3 assessor and our deputy assessor look at, and we 4 chase them, and we do what we can. 5 SENATOR DEFRANCISCO: And if there -- can 6 you -- if there is a way, is there any -- if you can 7 let me know if there's any legislation that you 8 think that will help the assessors do their job more 9 quickly, maybe a section of the law that is really a 10 roadblock that shouldn't be, that would be helpful 11 as well. 12 Now, that's as far as gaining additional 13 revenues. 14 I know you've made steps with the County for 15 consolidation, but it seems to me that, if this is a 16 uniform problem, and I know it's more so with the 17 town -- as much so with the towns and villages, 18 where you have police departments whose buildings 19 are within a baseball throw from each other. 20 And I know the Governor, when he was 21 attorney general, proposed legislation, making it 22 easier to petition for something on the ballot to 23 consolidate. 24 But it seems, like, even when the people have 25 been given the opportunity; for example, Camillus, 1 and the town of Camillus, they voted no for 2 consolidation. 3 DeWitt and East Syracuse wanted to 4 consolidate the police department. It went on the 5 ballot, voted no, and it resulted in property 6 increases. 7 Is there anything that you could see that we 8 should be doing, encouraging further, either 9 consolidation of services or of municipalities? 10 MAYOR STEPHANIE MINER: Well, as you said, we 11 have done a lot towards that, and we'll continue to 12 explore areas where there is a symbiosis in terms of 13 the mission, the ability to do it. 14 But when you look at where our costs are, if 15 we just take the fire department, they're really -- 16 they are legacy costs. 17 And the reason that you're seeing it more so 18 with towns and villages and cities is because we are 19 older than counties. 20 That doesn't mean the counties don't have 21 problems. 22 Nassau County is in a financial control 23 board. 24 Erie County has been in one for -- may be in 25 a soft control board right now. 1 But our fire department, we are the only 2 professional fire department in Onondaga County. 3 Who are we going to consolidate with? 4 And, the Onondaga County -- the government of 5 Onondaga County does not provide fire protection. 6 That's provided by individual towns and villages. 7 And even if they did, why would they take 8 this burden on, because it just becomes a loadstone 9 on their balance sheet? 10 Our police department; we have the largest, 11 most sophisticated police department in 12 Onondaga County. 13 Who are we going to consolidate with? 14 So, if you were to help us address those 15 two areas in particular, you would see us be able to 16 really get some more -- have our financial position 17 be healthier. 18 And, so, while consolidation makes sense in a 19 lot of areas, and we have -- I'm the first to say 20 that we have done it, we'll continue to do it, let's 21 not fool ourselves and think that we can just 22 consolidate these problems away. 23 Because, when you're looking at legacy costs, 24 they're going to be -- unless you increase revenues 25 or reduce liabilities, they're going to be on 1 somebody's balance sheet. 2 SENATOR DEFRANCISCO: Thank you. 3 SENATOR MARTINS: Mayor, thank you. 4 There's a reason we're in Syracuse. 5 And there's a reason -- 6 MAYOR STEPHANIE MINER: Seems everybody is 7 coming to Syracuse this week, Senator Martins. 8 SENATOR MARTINS: I'd like to think that 9 I brought him here, and he's coming, because we held 10 our hearing here, but, that may be wishful thinking. 11 If you consider a poster child today in 12 New York State for the kind of discussion we're 13 having today, it was only fitting that we come to 14 Syracuse first. 15 MAYOR STEPHANIE MINER: Well, I welcome -- as 16 I said, I am glad you're here. 17 This is a very important discussion for the 18 city of Syracuse, which is, obviously, near and dear 19 to my heart, but also for every municipality in 20 New York State. 21 SENATOR MARTINS: And to your point earlier, 22 we go to Buffalo and Erie County from here, on 23 Thursday. And we will be down in Nassau County a 24 week from today, because they do have control 25 boards. 1 And we have to also identify what works and 2 what doesn't work with these control boards, and see 3 what lessons we can learn from their experiences. 4 But coming back to this issue, and, 5 certainly, that particular chart, that graph, speaks 6 volumes. 7 When we do look at things like pension costs, 8 when we do look a things like health-care costs, 9 we're at a point right now where those legacy costs, 10 I believe, prevent us from being able to do anything 11 with regard to them today. 12 We're not going to eliminate them. We're not 13 going to turn our backs. 14 And I don't believe you're asking us to -- 15 MAYOR STEPHANIE MINER: I'm not. 16 SENATOR MARTINS: -- on those people who made 17 their commitment and are entitled to receive the 18 benefits of their work and their labor. 19 But, we do have to start thinking about 20 creating that new paradigm, going forward. 21 And, so, when we do discuss these issues, 22 whether it's a Tier 6, whether it's pension costs, 23 and I am understanding how pension costs are 24 calculated with the five-year smoothing, and 25 understanding that that spike in pension costs that 1 we are going through right now, should, by all 2 accounts, be coming down in the next few years, 3 actuarially. 4 We should expect some relief there, just 5 simply by virtue of the way that it has been 6 calculated. And that should also provide you some 7 relief. 8 And I would expect that that hasn't been 9 identified on this graph, but there should be some 10 breathing room there, but that's only some breathing 11 room. 12 So to the extent we can carry this 13 conversation forward, you certainly have identified 14 the issue. 15 But, as far as crafting a solution, going 16 forward, I think it's critically important that we 17 work together. 18 MAYOR STEPHANIE MINER: I would welcome that, 19 Senator. 20 SENATOR MARTINS: I'm looking forward to 21 that. 22 I'm looking forward to that discussion, and 23 perhaps future discussions on these particular 24 issues. 25 The legacy costs are the legacy costs here. 1 They're the same legacy costs we have in 2 Nassau County. 3 Same legacy costs, I'm sure we're going to 4 hear about, in Erie County. 5 It's how we change that dynamic, going 6 forward. 7 In a context, quite frankly, where we do have 8 election cycles every two or four years, and people 9 have to do things in two- and four-year cycles, as 10 opposed to in 10- and 20-year cycles, it's our 11 challenge to come up with these solutions now. 12 MAYOR STEPHANIE MINER: Well said. 13 SENATOR MARTINS: So we'll be working between 14 now and January. And, certainly, we'll be reaching 15 out to you. 16 To the extent that you can provide us with 17 the information that Senator DeFrancisco asked for, 18 specifically on those issues that are impacting 19 Syracuse, that provide us the basis, going forward, 20 to try and go back to our colleagues and build the 21 necessary consensus. 22 Because, I tell people all the time: We live 23 in a big state. Our experience in Nassau County is 24 different than your experience here in the city of 25 Syracuse. 1 And our colleagues and friends from the 2 city of New York have an entirely different 3 experience. 4 To convince them that there is a need and a 5 point of view up here, sometimes it's very difficult 6 because they don't see the world the same way we do. 7 So, we need to work together on both sides of 8 the aisle, to make sure that we pass that message 9 along, and provide the relief that we can, going 10 forward, for our cities in upstate. 11 So, Mayor, again, thank you. 12 MAYOR STEPHANIE MINER: Senator Martins, 13 thank you, and I really -- I welcome the 14 opportunity. 15 And, I'm very glad that you are here in 16 Syracuse. 17 And let me just say that Senator Valesky and 18 Senator DeFrancisco have been helpful to me as 19 mayor, with this issue, and so many others, since 20 I came into office on January 1st of 2010. 21 So, they are great colleagues to have, and 22 they have really been walking the walk and talking 23 the talk of what you just said. 24 But, we are happy to have -- be part of this 25 conversation, and work towards solutions. 1 SENATOR DEFRANCISCO: You're absolutely right 2 on that last point. 3 [Laughter.] 4 MAYOR STEPHANIE MINER: Thank you very much, 5 gentlemen. 6 SENATOR MARTINS: Thank you, Mayor. 7 SENATOR VALESKY: Thank you, Mayor. 8 SENATOR MARTINS: Next on our list of 9 witnesses this morning is Mayor Richard Donovan, 10 president of the New York Conference of Mayors. 11 Mayor, welcome. 12 MAYOR RICHARD DONOVAN: Anyway, gentlemen, 13 Senator Martins and distinguished panel, 14 I appreciate the opportunity this morning. 15 What I'd like to do is, focus on the small 16 municipalities, for the most part, with, hopefully, 17 some suggestions that are a little different, that 18 maybe you can consider on a broader brush. 19 But, Peter Baynes and Barbara VanEpps from 20 NYCOM will address the broader picture, if you will, 21 with the cities, and some of the big items that we 22 always talk about: the Wicks, and all the 23 Triboroughs, and all that sort of stuff, that, those 24 discussions just never go anywhere. 25 So -- 1 SENATOR MARTINS: Mayor, forgive me, but 2 I failed to identify that you are the mayor of the 3 great village of Minoa. 4 MAYOR RICHARD DONOVAN: Thank you. 5 SENATOR MARTINS: And so we can't go without, 6 certainly, identifying the village. 7 But, please, continue. 8 MAYOR RICHARD DONOVAN: Thank you, 9 I appreciate that. 10 We're a very proud, small, bedroom community, 11 and we are not stressed yet. 12 And I say "yet," because I'm representing, 13 I'm also the president of the County Mayors 14 Association. And speaking for that group, we kind 15 of got a double-whammy. 16 We lost about 55 percent of our sales tax to 17 the County here three years ago, right about the 18 time that the sales -- or the tax cap came onboard. 19 So we got some folks that are really hurting 20 because of that direct shift, if you will, on both 21 situations. 22 We also have the burden of unfunded mandates. 23 And I know that's a general term, and I'll get into 24 that in a minute. 25 The Governor's promised us, if we supported 1 him on the tax-cap issue, that he would give us 2 mandate relief. 3 And Tier 6, at the local level, especially 4 for villages, towns, and villages, doesn't get it 5 done. That's a long-term, "15, 20 years out" type 6 of relief. 7 So, essentially, we've received nothing that 8 helps us as we go forward. 9 Just a little perspective: 10 The way I look at villages, we're, 11 essentially, small cities. 12 We're areas, we're a community, we're a dense 13 population with infrastructure, that really can be 14 used to promote smart growth in our county. 15 It needs to be vibrant, as our city of 16 Syracuse, as we've already heard. 17 And, you know, we're, at this point, really 18 struggling, how to get it done as the city is. 19 At the local level, villages in particular, 20 we tend to be very small-staffed, frugal, on what we 21 do on a regular basis. 22 We share services. 23 And I guess, shame on us, because we don't 24 talk about that enough. 25 In our particular town, the town of Manlius, 1 we share with the village of Fayetteville, Manlius 2 men and equipment. 3 We share with the town of Manlius, we do 4 paving together. 5 We do a number of projects. 6 Sharing of different sewer cameras. 7 We happened to have one for a large main. 8 Fayetteville has one for laterals. 9 We don't each have one. We exchange on an 10 as-needed basis. 11 And we've been doing that, I've been on the 12 village board 24 years, and this is nothing new. 13 It's not something, all of a sudden, somebody 14 thought of as a great idea. 15 We've been doing that ever since I've been on 16 the village board. 17 So, the problem we have with what's going on 18 right now in the state is, and the mayor of Syracuse 19 spoke to this, too, we have no place to go. 20 My whole office staff is three. I'm supposed 21 to be part-time. 22 My sewer department's two. I get rid of a 23 guy, I've lost the whole department. 24 In fact, that happened a couple years ago. 25 Because of the loss in revenue from the sales-tax 1 scenario, I had to make a tough decision. 2 I had to eliminate a whole department, 3 because eliminating one person made it 4 non-functional, my whole department. 5 It happened to be our ambulance. Our 6 community-based ambulance. 7 Through some creativity, we were able to 8 outsource the staff and the management, and able to 9 keep that very important function in our village, 10 but not as a staffed unit of the village. 11 So those are a few things that we've done 12 to -- locally to make ends meet, if you will. 13 We consolidated of our police department with 14 the town in 1985. 15 We did it because we -- it was a -- we needed 16 to do it, not because we were forced to do it. 17 Consolidation by force does not work. 18 And I can tell you, from that experience, it 19 does not save us money. 20 Do we have a better police department 21 overall? Yes, we do. 22 Is there economies of scale based on today's 23 services? Yes, we have that. 24 But taking it back to the village level, we 25 did not save money. 1 I guess from where I sit, and this is one of 2 my -- kind of putting on my NYCOM hat at this point, 3 from a simple farm boy from the North Country, we 4 need action, not studies, not new gimmicks. 5 You know, we need to get down to the real 6 things that we can effectively approach and maybe do 7 something about. 8 Just some ideas: 9 Increase the limits on the procurement-bid 10 policy that we have. 11 Currently, it's $35,000 for public works, and 12 $20,000 for regular purchasing. 13 You don't get a whole lot for $35,000 14 anymore. 15 We need to see that raised, and we need to 16 see it substantially raised. 17 What that does, the bid process costs money. 18 I don't have to tell you guys that. 19 And if we could raise that threshold, that 20 would certainly be helpful. Not going to save the 21 world, but it's one of those little things that adds 22 up. 23 Just to comment in the flow of things: 24 We just had a -- you know, the minimum-wage 25 increase. 1 That is forcing a lot of our small folks 2 either out of business or to cut their hours and/or 3 staff. They just can't afford to do business with 4 that additional money on the table that they have to 5 pay their help. 6 Same thing goes for our farmer folks. You 7 know, that's a real burden. 8 And that's one of the things, I think, when 9 you talked about what happens with the influence on 10 New York City, and maybe Long Island, it's a 11 different world than from up here. 12 But, influences like that make a big 13 difference when they come down as an 14 across-the-board law. 15 We need help with, and I'm going to call it, 16 the "banking laws." 17 As I have started to travel the state, 18 talking to my comrades around the state, abandoned 19 properties is a huge issue. 20 And what is happening is, the owner walks 21 away, the lender walks away, and we're stuck. We 22 can't move the property. 23 We can't -- I have a situation right now in 24 my village. I have a cute little bungalow that's 25 sitting in limbo. I've got four buyers for the 1 property. 2 The bank won't foreclose, because they don't 3 want the liability, and they seem to have no 4 interest in stepping up to the plate and moving this 5 property. 6 I am two weeks away from tearing that piece 7 of property down. 8 It's a crime, but there's no vehicle in 9 there, whether it be banking policy, or what, to 10 move that process forward. 11 Talking to the mayor of one of our cities, 12 the mayor of Newburgh, is a list of property right 13 now that amounts to 700 properties. 14 That's incredible. 15 We're maintaining, trying to do what we can, 16 so it doesn't degrade the neighborhood. Mow the 17 lawns, all that sort of thing. That all costs 18 money. 19 Okay, it goes on the tax rolls. 20 Hopefully, someday, the County, or somebody, 21 will make us whole, but that's not the answer. 22 We need some kind of a vehicle there, so if 23 the homeowner walks away, and the bank or credit 24 union, or whatever, walks away, that we, somehow, 25 can obtain that obtain property and move it, and get 1 it back on the tax rolls and make it a vibrant part 2 of our community. 3 One of our favorite subjects at this level is 4 prevailing wage. 5 It's a killer. 6 For a small community with, typically, small 7 projects, we can't get local people to bid on a job. 8 The reason for that, they'll tell you: I pay 9 my guy 8 bucks an hour on a regular basis, and all 10 of a sudden I've got to pay him 18 or 20 or 24. And 11 the next day he's back on the $8 job, and he's, 12 like, "Well, what are you doing to me? I want that 13 24 bucks." 14 We're not going there. 15 It's extra paperwork for us, extra expense, 16 and my employees get upset with it. 17 We're not even going to quote on the job. 18 So that's something that we would certainly 19 like to see addressed, and especially in small 20 communities, would save us a bundle of money. 21 There's a lot of difference between the going 22 rate of a general contractor in my area and what the 23 prevailing wage set by somebody, somewhere. You 24 know, it's -- the differential is incredible. 25 Things that have come down from up top that 1 we have to deal with: 2 We're the enforcement arm for the DEC. 3 Where did we get that privilege? 4 I have a part-time codes officer. And I'm 5 mentioning that, I share that codes officer with the 6 village of Fayetteville. 7 So, we're again sharing services, but, we 8 have very limited resources to go out and enforce 9 DEC rules. 10 MS4s, stormwater; all sorts of regulations on 11 that front. 12 We do have, and I've been very active locally 13 with a coalition -- a local coalition here, with 14 villages and counties, working together to try and 15 defray that cost. 16 But, that's another burden that's come down 17 to local government that really doesn't get 18 discussed. 19 I just spent over $15,000 for what is called 20 a "personal escape system." 21 That law was as a result of a tragic 22 accident, or a fire scene, in New York City. 23 So the law originated in New York City, of 24 which they're exempt from. 25 It requires my firemen, interior firemen, to 1 carry enough rope to get out of any building of any 2 structure we have or surrounding communities that we 3 service mutual aid to. 4 It's a specific, per person. It's an extra 5 load on their body. And, it's something that, 6 really, we do not need in our local communities. 7 We have ladders to reach any -- any height 8 that we're dealing with. 9 You know, maybe I'm not in the, Gee, can I 10 have everything I want, maybe that works? 11 But the firemen will tell you, it's an extra 12 load they got to carry. It's something else to get 13 hung up on in a fire scene. 14 And, it's an extra burden on the local 15 municipality. 16 You'll probably laugh at some of these 17 suggestions. I've thrown them out at NYCOM. 18 The Legislature, in the good times, forgave 19 contribution to the retirement system for those that 20 were vested over ten years. 21 For the life of me, I cannot figure out, and 22 nobody has told me to date, why the Legislature 23 cannot reinstate that contribution. 24 That would help. 25 As you saw in Mayor Miner's presentation, the 1 local burden, wouldn't cure it, but it would 2 certainly help the local burden from that pension 3 fund. 4 I have been told that some people think it's 5 a constitutional thing. 6 For the life of me, if it was forgiven by the 7 Leg, it should be able to be reinstated by the Leg. 8 That, gentlemen, would be huge for everybody 9 in the state. 10 And by the way, I have talked to a number of 11 people that that would affect personally, and they 12 have no problem in contributing to their own 13 retirement, that we are supporting and they do not 14 contribute. 15 How about something, like, eliminate the 16 two-year terms for elected officials. 17 Elections are expensive. 18 And at your level, and at the federal level, 19 those folks are running, all two years, to get their 20 next two years, and they're not focused, maybe, 21 where they should be, on a regular basis, with the 22 issues at hand. 23 It's a tremendous expense to have an 24 election, and it's a tremendous burden on the 25 elected official to go through that process every 1 two years. 2 So, those are a few of my suggestions. 3 And, on behalf of my Onondaga County 4 colleagues, and NYCOM that I now represent as their 5 president, I appreciate your being here today, and 6 listening. 7 And, certainly, I would be willing to sit 8 with anybody, at any time, to discuss any 9 suggestions you might have, or opportunities at 10 least to sit around the table and see what we can 11 work out, because we're in trouble. There's no 12 question about it, as a state, long term. 13 And one other comment I'll make on behalf of 14 my colleague Mayor Jennings: 15 It's not Albany's fault. It's at the 16 Legislature at the Capitol. 17 Thank you very much. 18 SENATOR MARTINS: I'll have to thank 19 Mayor Jennings personally. 20 [Laughter.] 21 MAYOR RICHARD DONOVAN: He'll appreciate 22 that. 23 SENATOR MARTINS: I'm sure he will. 24 Mayor, on the issue of bid procurement, just 25 a point: I know we passed legislation this year in 1 the Senate, I'm not sure if it actually passed the 2 Assembly, to do just that; to increase the 3 thresholds for bid procurement. But, I'll have to 4 go back and take a look at that. 5 With regard to prevailing wage, are you 6 suggesting that the threshold for prevailing-wage 7 projects be set at a certain level? 8 And if the project falls below that level, 9 that you do not have to build that project using 10 prevailing wage, but you do after, or above a 11 certain threshold? 12 MAYOR RICHARD DONOVAN: That would be a good 13 compromise, from my standpoint. Let the 14 competition, you know, determine where the wage 15 needs to be. 16 As far as I'm concerned, it should go away. 17 But, certainly, if we had a threshold that we 18 could -- you know, for the -- I mean, to pay an 19 electrician to come in and, you know, change out a 20 faulty switch, or something, prevailing wage, they 21 look at you like you're nuts. 22 And I -- like, I have no choice. 23 SENATOR MARTINS: I'll share a story with 24 you, and I haven't told my colleagues this story. 25 But, in a former life, I was a mayor of a 1 small village of about 20,000 people down in 2 Nassau County. And we repaired -- or, we had to 3 replace a roof on a building that would have cost, 4 probably, about nine or ten thousand dollars to do. 5 Because it had to be done prevailing wage, it 6 cost us over $60,000 to repair that roof. 7 So, that's a reality. And when you're 8 dealing with it on a local level, a village, a small 9 village certainly, that additional cost can be 10 crippling to a local village budget. 11 So I do understand your point. 12 Senator DeFrancisco, any questions? 13 SENATOR DEFRANCISCO: (Shakes head.) 14 Senator Valesky? 15 SENATOR VALESKY: (Shakes head.) 16 SENATOR MARTINS: Mr. Mayor, thank you. 17 Thank you very much. 18 MAYOR RICHARD DONOVAN: Okay, I neglected to 19 thank you for your work on the asbestos licensing 20 fees for abatement. That's -- if that can go 21 through, that would help too. 22 SENATOR MARTINS: A tremendous help. 23 I do appreciate that. Thank you very much. 24 MAYOR RICHARD DONOVAN: Okay. Thank you. 25 1 SENATOR MARTINS: Our next witness is 2 Mayor Richard Milne. 3 Good afternoon, Mayor. 4 MAYOR RICHARD MILNE: Good afternoon, 5 gentlemen. 6 Thank you for allowing me the opportunity. 7 I'm both honored and privileged to be here today. 8 Preparing for and preventing municipal 9 bankruptcy is, indeed, a very important topic that 10 was not talked about too much in past years, but, 11 certainly, today is. 12 In preparation for this meeting, I contacted 13 the nine other Monroe County village mayors, my 14 peers, to enlist their comments, and, quite 15 honestly, most were very similar. 16 It's easy to discuss concerns revolving 17 around the 2 percent tax-levy cap and numerous 18 unfunded mandates that each municipality is 19 afflicted with. 20 However, I will try to focus on the need for 21 support from our state government, to support small 22 communities that help drive our counties and cities. 23 While I do not generally have the opportunity 24 to meet with my peers from across the state on a 25 regular basis, through training with NYCOM, I'm able 1 to meet with many of them in short term, and we 2 often talk about the same concerns. 3 As a municipal government, we are dictated by 4 the State to work within a balanced budget, and to 5 do so while maintaining a sound budget that does not 6 overtax our residents. 7 We are often audited by the State. 8 And in Honeoye Falls, we have a complete 9 audit conducted each and every year by an outside 10 party. We do this because we want to fully 11 understand any improvements we can make to be as 12 efficient as possible. 13 However, we also have another goal, and that 14 is to do as much as we can with as little as 15 possible. 16 We are now a couple of years into the 17 tax-levy cap, and for Honeoye Falls, and the 18 majority of my peer communities, we have been able 19 to adhere to the cap, keep tax increases to a bare 20 minimum, and still work within a balanced budget. 21 However, with pension costs continuing to 22 escalate, medical coverage continuing to escalate, 23 and the general cost of business escalating, working 24 within our budget, without cutting services or 25 depleting all of our unappropriated fund balances, 1 and still remaining within the tax-levy cap, is 2 difficult, if not impossible. 3 In 2009, Honeoye Falls contributed 4 6.9 percent to the New York State retirement of our 5 employees. In 2013, that percentage is 6 20.8 percent. 7 In 2009, Honeoye Falls contributed $944 to a 8 family plan for medical insurance. In 2013, that 9 number is $1,038. 10 This may not seem like a lot, but in 2009, 11 it's important to understand that medical coverage 12 was funded at 100 percent level by the village. We 13 now ask our employees to cover 20 percent of that. 14 Soft costs are often not discussed, but are 15 extremely important to understand, as these are real 16 costs of doing business today. 17 Today we can only pay 60 percent of the 18 village roads that we did just 5 years ago at the 19 same cost. 20 Pipe costs for sewer work is 40 percent 21 higher than it was 5 years ago. 22 These are the type of costs that affect small 23 communities each and every day. 24 In an effort to lower costs, the Village of 25 Honeoye Falls and Monroe County created a 1 shared-services agreement to utilize our building 2 inspector with both the town and village of Lima, 3 which is in Livingston County. 4 Working with three municipalities part time 5 allowed us to save our taxpayers money and still be 6 efficient with building-inspection duties. 7 We estimate that saving, this is a relatively 8 new program, to be about $25,000 a year to our 9 village. 10 In an effort to lower costs and improve 11 efficiencies, the Village of Honeoye Falls, Town of 12 Mendon, Town and Village of Lima, New York, along 13 with the Honeoye Falls-Lima Central School District, 14 created a shared-services agreement to have the 15 school district run a summer recreation program that 16 was formerly run by the municipalities. 17 This was also previously two recreation 18 programs: one in the town and village of Lima, and 19 one in Mendon and Honeoye Falls. 20 These were consolidated into one, and 21 enhanced by the school running the program, as 22 that's what they do with children. They know how to 23 take care of children. We don't have recreation 24 departments. 25 The savings at this time, again, a relatively 1 new program, we expect this to save the village 2 community over $30,000. 3 Villages do not have the ability to stockpile 4 money. 5 In Honeoye Falls, we have tried to keep our 6 unappropriated fund balance to about 14 to 7 16 percent of our budget, and have been successful. 8 But we now find ourselves tapping further 9 into this because of our -- because our residents do 10 not want to lose services, and do not want to have a 11 large -- and we do not have a large tax base in 12 which to draw from. 13 Opportunities for cutting expenses are drying 14 up and we are delaying necessary purchases, but 15 there's a difference between conservative, 16 responsible restraint and the inability to afford 17 necessary purchases. 18 Our regional economic-development councils, 19 and the financial support provided through these 20 groups, and the State, are certainly positive. 21 However, the funds provided by these 22 generally seem to go to universities or businesses 23 involved with universities, and, obviously, to the 24 larger county developments. 25 And while I understand these projects may 1 create more immediate jobs, I feel it extremely 2 important to consider a plan to provide a portion of 3 these funds to small communities for use in 4 infrastructure programs, streetscape programs, and 5 other economic-development plans. 6 If, in each region, a portion of the 7 appropriated funding from the State were given to 8 small communities, these communities would be able 9 to bolster their economic vitality as well, and thus 10 support the larger county or city area that they 11 border. 12 If there are not vital villages surrounding 13 the larger city, a city cannot survive. Each feeds 14 off of another and supports one another. 15 In Honeoye Falls, we just completed phase one 16 of a sewer-line replacement project. This project 17 will cost our village approximately $300,000, as 18 it's completed. 19 This project is key for our village, and will 20 support new business and residential growth. 21 However, obtaining funding for this project 22 via a grant was virtually impossible. 23 The Village could have obtained a low-cost 24 loan, but, again, trying to be fiscally responsible, 25 we did not want to finance the project for a long 1 term. 2 Through sound budgeting, we have saved and 3 grown our capital reserve lines, and try to pay for 4 projects up front, or at least a portion of the 5 project. 6 Had two or three hundred thousand dollars 7 been more easily attainable through a regional 8 economic council for projects such as these, small 9 communities would have a much better -- would be in 10 a much better position to advance their economic 11 development. 12 I would think that a portion of this funding 13 should be earmarked for small-community projects. 14 This will enable the State to get the best value for 15 the money provided, and true return on the dollars 16 spent. 17 Without solid mandate relief and control of 18 mandated expenses, villages and communities 19 throughout the state will continue to spiral 20 downward. 21 Sound fiscal planning is the duty of each and 22 every municipality; however, without either real 23 mandate relief, or financial support for the life 24 blood of a village, which is the infrastructure, we 25 will also find our state in dire straights. 1 Thank you very much. 2 SENATOR MARTINS: Thank you, Mayor. 3 I just wanted to thank you. That suggestion 4 that a percentage of regional economic-development 5 council monies go specifically towards our 6 downtowns, makes sense. 7 Certainly, at a time when we're looking to 8 ramp up our downtowns as economic engines as we get 9 out of this economic downturn, it make sense that, 10 since we do have these monies out there, that at 11 least a portion of those also go right back into the 12 infrastructure in our downtowns, and, hopefully, 13 increase and support the vitality of our downtown 14 business communities. 15 So, I appreciate that. 16 MAYOR RICHARD MILNE: Thank you. 17 I think -- in addition to that, if I may, I 18 think it's -- it's difficult for the small 19 municipalities across the state, no matter where 20 you're at, to compete for some of the grant 21 opportunities that are out there. 22 We don't have our own grant writers. 23 Maybe some regional support of grant writers 24 in counties, or whatever, that could work with all 25 municipalities. 1 It can be very expensive for a small 2 community to go out and have somebody write a grant 3 for them if they can't do it themselves, and then 4 have to pay a portion of that grant, or $10,000, or 5 whatever. That's tough money for a small village. 6 But, I think if those -- if small 7 municipalities thought they had a better shot at 8 getting some of this funding, they may be a little 9 bit more aggressive as well. 10 Again, thank you for the opportunity. I 11 appreciate it. 12 SENATOR MARTINS: Our next witness is 13 Peter Baynes, who's the executive director of the 14 New York State Conference of Mayors. 15 Mr. Baynes, welcome. 16 PETER BAYNES: Thank you. 17 SENATOR MARTINS: And, of course, 18 Barbara VanEpps. 19 Ms. VanEpps, how are you? 20 BARBARA VANEPPS: Thank you, Senator. 21 PETER BAYNES: Yes, thank you, Senator, and, 22 all three Senators today. 23 You have all been very supportive of local 24 governments over the years. Your doors have always 25 been open to NYCOM. 1 I know these are difficult issues, but the 2 fact that you're here, spending time on the issue, 3 I think speaks volumes to your interest in solving 4 the problem. 5 You alluded to who's up here with me. 6 Barbara VanEpps, just for the record, she's 7 our deputy director, and legislative director, and 8 is here to bail me out when questions get difficult. 9 You know you've heard from three mayors who, 10 in certain ways, said a lot of the same things, it's 11 just a question of scale. 12 I'm going try to not repeat what they said. 13 Maybe tie it together, and give you the statewide 14 perspective from NYCOM's perspective. 15 You know, the first question today, and I've 16 been getting, is, you know: Are we heading for 17 Detroit here in New York? Do we have cities that 18 are there? 19 I wouldn't say we -- I would say, we aren't 20 Detroit, but we're certainly on our way there if 21 things aren't changed. 22 You know, Detroit got to where they are by -- 23 one of the big reasons, was they avoided the hard 24 decisions. 25 And, you know, it's time that New York, at 1 the state and local level, make sure that we start 2 making the difficult decisions. 3 And, again, I think the fact that you're here 4 is emblematic of your interest in doing that. 5 We do a city-budget survey every year to see 6 how our cities are doing. 7 And, this year, a third of the cities 8 characterized their fiscal condition as either weak 9 or very weak; 10 A third of the cities also said their fiscal 11 condition was worsening or significantly 12 deteriorating; 13 And almost half of the cities said that, 14 within four years -- we asked the question: 15 Within four years, do you see yourselves, 16 your municipality, on the way to insolvency? Will 17 you be unable to pay bills on the current path 18 you're on? 19 And nearly half of the cities said yes. 20 You know, at these hearings, it's always 21 about pointing out, causes, blame, however you want 22 to characterize it. 23 There's plenty of that to go around. 24 Some are causes beyond our control, like the 25 federal and state economy. The "Great Recession" 1 has affected everybody in many ways; virtually all 2 in negative ways. 3 Local governments, like the State, have taken 4 a hit on their revenues, and their costs have gone 5 up, because of the recession. 6 Local governments have seen their sales tax 7 plummet. It's on its way back, but it had a serious 8 impact. 9 The mortgage-recording taxes, and talked 10 about a lot, but that had become a very important 11 revenue source for local governments. It helped 12 support the fund balance they needed, and they're 13 now using, unfortunately. 14 On average, property-tax bases have been 15 declining by 1 percent a year, which, as you know, 16 when your assessed-value declines, that's -- all 17 else being the same, that's an automatic tax 18 increase. 19 Some cities are starting to turn the corner 20 in that regard. 21 Pension costs, I'll talk a little more about 22 it, but we know that the rates have gone up 23 approximately 150 percent just in the last 24 four years. 25 And, it's funny, we haven't heard a lot about 1 the tax cap today. 2 I was going to point out that we've had a tax 3 cap even prior to the one you enacted. 4 There's a political tax cap that has 5 certainly kicked in in New York, especially 6 Upstate New York. 7 There's, just, local taxpayers have reached 8 their economic limit for what they can pay. 9 So all of those things, these outside forces, 10 have put huge pressure on local governments. 11 But then there have been policy and political 12 decisions, and let's start at the local level. 13 There, clearly, over the years, have been bad 14 decisions made by local leaders, especially as they 15 pertain to contracts. And, either -- for whatever 16 the reason was -- fear of binding arbitration, 17 political expediency, just not being a tough 18 negotiator -- some bad contracts have been -- and 19 I'm not even talking about binding arbitration, I'm 20 talking about negotiated contracts, there have been 21 some bad decisions made at the local level. 22 And because of things like Triborough, the 23 legacy of those bad decisions lives on, and current 24 local government leaders have to deal with them. 25 But I would say that the local fiscal 1 problems are so widespread. We can't say it's in 2 every case. It's just mayors making bad decisions. 3 There's a lot more to it than that. 4 There's something systemic going on, and a 5 lot of it has been hinted at or pointed out today. 6 And the State, of course, we're going to talk 7 about the good things the State has done, but the 8 State has done some things that have made the 9 situation worse at the local level. 10 There's been an accumulation of mandates over 11 the years. Many predate the three of you. And they 12 are very difficult, as you know, to remove, even to 13 reform. 14 So those continue to cause pressure at the 15 local level. 16 Pensions; a central problem in Detroit, a 17 central problem here in New York. 18 A downstate mayor recently, I read a quote 19 from him that I thought summed up our pension system 20 in New York very well, when he said, "We have a 21 benefit structure that promises retirees too much, 22 too soon, and requires them to contribute too little 23 to pay for it. And after a while, that catches up 24 with you." 25 And it has caught up with us here in 1 New York. 2 We've had pension-sweeteners over the years 3 that, you know, will create a new tier. 4 The Legislature would create a new tier, one 5 step forward, in terms of relief. But then there 6 will be a step back, or two steps back, when 7 pension-sweeteners are enacted. 8 I know Triborough's a difficult issue, and, 9 it was quickly thrown off the negotiating table this 10 year in Albany, but, the insidious effects of 11 Triborough have to be noted. 12 I was reading -- from that same mayor I just 13 quoted from, I was reading an example, which I 14 hadn't seen it in such stark terms, of what 15 Triborough can do at the local level. 16 In New York City, as you may know, all of 17 their contracts are expired right now. For the last 18 four or five years, they've been expired. 19 And mayors are told, oftentimes, Why don't 20 you just negotiate better contracts. 21 Well, the mayor of New York, in 2010, said: 22 You know what? We're going to do that. We're going 23 to demand every contract, going forward, that there 24 is a fair contribution from the employees and 25 retirees toward health insurance. 1 From that point forward, in 2010, it's no 2 coincidence, there hasn't been a contract agreed to 3 in New York City. 4 So what happens, the unions wait it out. And 5 because of the Triborough, and step increases in the 6 contracts, raises continue. 7 The example that I read, that I think brings 8 home what happens, is: In 2009, a teacher in 9 New York City with 5 years experience is making 10 $59,000. They haven't had a contract since then. 11 And, now, 5 years later, that same teacher is making 12 $79,000. 13 That's without, quote/unquote, "getting a 14 raise." 15 So that's a 36 percent raise over five years 16 without a contract in place; and, meanwhile, the 17 unions are still demanding retroactive raises for 18 when the contracts finally are renegotiated. 19 So, I think that kind of sums up the 20 challenge of Triborough, and what it does at the 21 local level. 22 Binding arbitration is certainly a cause. 23 And Mayor Miner did a great job of 24 highlighting that. 25 You know, we're in this era of transparency 1 and accountability, and binding arbitration really 2 has neither. It's unelected decision-makers, 3 there's no costing out of award costs, and there's 4 no presentation by the arbitrators to the public. 5 State aid has been -- at a time when local 6 governments needed aid the most, State aid has been 7 cut 7 percent over the last five years. 8 So, that's certainly a cause. 9 So where are we at? 10 At the local level right now, what are the 11 effects of these causes? 12 As you can see in charts that were shown 13 earlier, there's a structural balance at the local 14 level, which our mayors would contend, and I think 15 Mayor Miner documented, are beyond a strictly local 16 solution. 17 You really can't cut your way out of the 18 problem at the local level without risking becoming 19 a Detroit. 20 A large part of Detroit's problem was, when 21 they finally started to own up to their problems, 22 the cutting had to be so severe that it increased 23 crime, the value of property plummeted, and then the 24 cycle of erosion began. 25 Tough decisions are being made at the local 1 level. 2 Police-force sizes, just since the 3 "Great Recession" started in 2008, if you look at 4 police forces and fire departments in this area, if 5 you look at what some of the cities have done. 6 And the police force, city of Oswego has 7 reduced the size of their force by 21 percent; 8 Ithaca, by 16 percent; Utica, by 9 percent; Syracuse 9 and Fulton, by 6 percent. 10 If you look at fire departments, Utica has 11 cut theirs by 14 percent; Ithaca, by 12 percent; 12 Syracuse, by 7 percent. 13 So, the cutting is happening. And when 14 there's cutting at the public-safety level, you know 15 things are serious. 16 Just a couple statistics that will cite -- 17 or, will show, I think, how severe the problem is 18 right now. 19 Right now, pension and health-insurance costs 20 at the local level exceed the entire real-property 21 tax levy in the average city. 22 So just to pay for those two things, pensions 23 and health-insurance costs, every dollar in property 24 taxes has to go to that. 25 In more than half of the cities, they pay 1 more for retiree health insurance than they do for 2 current employees' health insurance. 3 Pensions in cities outside of New York City, 4 over the last four years, have increased by 5 $560 million in the 61 cities outside of 6 New York City. That's $250 per capita, in the 7 average city, for a resident to have to pay over the 8 last four years for the increase in pension costs. 9 The bottom line, as I said earlier, nearly 10 half of the cities see themselves on this flight 11 path toward insolvency within four years. 12 And most importantly, and why we're here, is 13 to talk about solutions. 14 I think it's clear we have a problem. And 15 maybe even more than a problem, we have a crisis. 16 And I -- again, I don't think locals on their 17 own can fix the problem. They have certain things 18 they can do. They can use fund balance. They can 19 use attrition and layoffs. They can consolidate. 20 But, again, all those things combined, we 21 don't believe are sufficient. 22 We really think, it's not a time for a blame 23 game, and that's not what we're here to do. 24 We're here to say, it's in the best interests 25 of local governments and the state, for the State 1 and local governments to come together. 2 It's cheaper now for the State to help with 3 the problem than it will be in four years when 4 bailouts truly are needed. 5 So what we're calling for, and asking for 6 your support, is a true State-local partnership, and 7 that means removing barriers and providing tools to 8 local governments so they can fix their problems 9 themselves and then be held accountable for that. 10 And, even though we haven't talked about it 11 over the last several years, as an organization, we 12 think it's time to talk about an increase in 13 AIM funding. 14 We knew that the State was in tough fiscal 15 straights over the past four or five years. 16 You're coming out of that, thanks to the 17 tough decisions you've made at the state level, with 18 the Governor, but we think it's time that local 19 governments -- that a real commitment is shown to 20 local governments through an increase in State aid. 21 A predictable year-to-year increase, I've 22 talked about, why don't we look at tying AIM-funding 23 increases to school-aid increases. 24 And we're not -- we would never ask for the 25 same dollar amount as the schools, because the State 1 certainly can't afford that. But, even if it was a 2 quarter, or 20 percent, of what goes to school aid 3 every year, the increase, if we invested that amount 4 into our municipalities, we think the municipalities 5 have shown they use their aid wisely. They use it 6 to control taxes. And I think it will help the 7 infrastructure that is certainly under duress in our 8 cities and villages around the state. 9 You know, people ask: Is the State helping 10 local governments? 11 And I say yes. 12 The thing is, there's a spectrum of help. 13 You know, at zero on the spectrum, or 1 on 14 the spectrum, is promising nothing and delivering 15 nothing. 16 10 on that spectrum is getting to the point 17 where you have to come in and fiscally bail out 18 cities, impose a control board. And maybe even have 19 that control board declare bankruptcy, like happened 20 in Detroit. 21 We're asking for something in the middle. 22 And I think you're on your way there, from 23 1 to 5. There are things that have been done over 24 the last several years that are helpful, but more 25 needs to be done. 1 In terms of some of the things you have done, 2 that I want to acknowledge, and just briefly comment 3 on: 4 To some people, you know, I have members, 5 who, these things don't sound like big items. 6 Why are they hard to get done? 7 I understand that, when you're in a 8 Legislature with, you know, diverse members in each 9 House, between both Houses, a large number of 10 members, the downstate-upstate dichotomy, it's hard 11 to get these things done. 12 And some of them, I know are significant. 13 Tier 6, even though it will not reap benefits 14 for several years, that was a very important thing 15 for you to do, and we acknowledge that. 16 I think, binding arbitration, the tweaks to 17 binding arbitration were largely a missed 18 opportunity, but, there will be another bite at that 19 apple in three years when it expires. 20 The financial restructuring board that the 21 Governor promoted, and the Legislature enacted, you 22 know, we think it's positive. 23 It's always positive when local governments 24 have other leaders at the table with them, to help 25 them develop plans to solve the challenges they 1 face. But I don't think, in and of them -- in and 2 of itself, the financial restructuring board is 3 going to change the imbalances that are out there. 4 You heard from the Comptroller's Office today 5 about their fiscal-stress monitoring system. 6 Again, I think that's helpful, especially for 7 smaller local governments that don't have a -- don't 8 have -- that don't go to the bond market regularly, 9 they don't have audits done regularly to help them 10 be aware of their situation. 11 But, I think the awareness, for the most 12 part, is there. It's solutions that we need right 13 now. 14 Consolidation grants that have been available 15 for the last five, six, seven years, they've been 16 helpful in some instances, but, frankly, I think 17 they would have been much better spent on 18 AIM-funding increases to local governments. 19 For the most part, consolidation grants have 20 gone to consultants, and nothing has come of it. 21 And then the pension-smoothing plan that was 22 adopted this year, our sense right now, is not many 23 of our members are going to take advantage of it. 24 And I think you all understand why they don't 25 want to have to take advantage of it, if they don't. 1 They would rather pay as they go if they 2 possibly can, and to avoid the kinds of things that 3 got other cities and other states in trouble. 4 So what are we recommending, going forward? 5 We're asking you to be more bold and 6 structural in your reforms. 7 I know Triborough is a tough issue, but we 8 think something needs to be done, at least as it 9 relates to the automatic step increases from year to 10 year, in terms of suspending -- suspending those, so 11 Triborough doesn't just become a motivation for 12 unions to not come to the bargaining table. 13 Binding arbitration, again, in three years, 14 our sense is, you're gonna see that the experiment 15 we're entering now with binding arbitration is not 16 going to make meaningful changes to the size of the 17 awards coming from arbitrators, but we will 18 certainly, along with you, be looking to see how 19 that plays out. 20 It was also mentioned by Mayor Miner, I 21 believe, we'd like to see a cap on the amount -- and 22 we'll have to phase this in, but a cap on the amount 23 local governments, as employers, can contribute to 24 employee and retiree health insurance, something 25 similar to what the State has negotiated with their 1 unions. 2 Also, we support what was mentioned earlier: 3 the authorization for a service charge for 4 not-for-profits. 5 And I do think that can be done in a 6 constitutional way, as long as it's not just a tax 7 in fee clothing. It's got to be done in a way that 8 it clearly is a fee and not a tax on 9 not-for-profits. 10 We're going to have to have the ugly 11 discussion of giving local governments additional 12 revenue-raising authority. 13 I know nobody wants to talk about that, but 14 there is a revenue problem out there. 15 I think the revenue problem's actually bigger 16 than the spending problem at the local level. 17 We've supported a local option increase in 18 the gross-receipts tax at the local level, from 19 1 to 3 percent. 20 Simple little things that don't sound like a 21 lot, but they are -- they're the pebble in the shoe 22 of local governments, that -- that, Why does the 23 State get to charge more for birth and death 24 certificates than local governments do? 25 Let's make those compatible. 1 Mayor Donovan mentioned at the end of his 2 remarks about the legislation you put in, 3 Senator Martins, having to do with the 4 asbestos-project notification fee. 5 We don't think local governments should have 6 a barrier to taking care of properties that are 7 abandoned in their communities. And that's what 8 that fee has become. 9 So we think the waiving of that fee paid to 10 the State would go a long way toward helping our 11 members clean up their communities. 12 And, again, I mentioned State aid. 13 I think it's time that we have a conversation 14 about increasing State aid. 15 And ten years ago, if I sat here, I would 16 say: Don't you dare put strings on any money that 17 you give local governments. 18 I think we're at a point now where we're 19 willing to get that additional aid. We're willing 20 to have accountability measures, performance 21 measures, to make sure the aid is being used 22 properly. 23 But, most importantly, there needs to be an 24 increase in State aid. 25 So with that, I will stop. 1 And if you do have any additional -- have any 2 questions, I certainly would be glad to respond to 3 them. 4 SENATOR MARTINS: Okay, thank you. 5 Of those communities that you surveyed, that 6 identified that they're on a four-year path to 7 insolvency, did they identify what causes would put 8 them on that path; and, specifically, what causes 9 have put them on that path? 10 Because, you know, as we said earlier, if we 11 can identify the problem, then we can begin to 12 discuss possible solutions, but, we have to identify 13 that problem. 14 And if there's a sense out there for that 15 many cities that believe that they are on that path, 16 why? 17 PETER BAYNES: Well, they did point out 18 that -- and the two key problems which keep coming 19 up in every stressed city in the country, is 20 pensions and health-insurance costs. 21 And part of the survey also is: What are you 22 doing, and what have you been able to do, to reign 23 in health-insurance costs, or, change the mix of 24 sharing between the employer and the employee on 25 health-insurance costs? 1 And there are efforts being made, but they 2 are very difficult, and they're incremental, because 3 of the Taylor law and binding arbitration. 4 So, that's why we've taken the unusual step 5 of asking you to actually put a cap on how much 6 local governments contribute as a percentage toward 7 their employees' and the retirees' health insurance. 8 SENATOR MARTINS: These issues are generally 9 dealt with, and have historically been dealt with, 10 through negotiation. They're negotiated at the 11 bargaining table as these collective-bargaining 12 agreements come up. 13 And I do see that there is a path to these 14 collective-bargaining discussions and 15 collective-bargaining agreements. And there's a 16 string, if we connect all of the mayors and all of 17 the elected officials, all of the people who 18 testified here today. 19 I guess what I am sensing, is that there's 20 a -- they're requesting the Legislature take on the 21 responsibility of recalibrating the system. Sort 22 pressing the reset button. 23 When we talk about legacy costs, when we talk 24 about legacy decisions, that are now -- or, being 25 placed on current elected officials, what I'm 1 hearing is, you'd like the Legislature to take on 2 the responsibility of sort of pressing a reset 3 button, and saying, you know, We're gonna 4 recalibrate, recreate this paradigm. 5 And rather than relying on the historic norm, 6 which is collective bargaining and negotiation, and 7 sitting at the table with -- you know, across the 8 table from your collective-bargaining units, you're 9 asking the Legislature to take that responsibility 10 on, and shifting it. 11 And, frankly, in this climate, and with, you 12 know, the historic nature of what we're talking 13 about, I don't know if that's possible. 14 PETER BAYNES: Yeah, well, just to be clear: 15 That -- what you said is true, that we are asking 16 that, but only as an alternative to not level -- if 17 you -- as a preference, we'd like you to level the 18 playing field in collective bargaining so that it is 19 a fair bargain that's negotiated. 20 We don't think, right now, with Triborough, 21 and even with the reformed binding arbitration, 22 which not everybody -- not all local governments 23 will have access to, even with those -- with those 24 two things out there, we don't think we can 25 negotiate at the local level in a fair way, to make 1 significant enough change, moving forward. 2 That's why, like I said, it's a drastic step 3 for us to ask you to put that limit in there. 4 We'd rather you do the other: Deal with 5 binding arbitration more significantly, take step 6 increases out of the Triborough amendments 7 protections, and let us solve it locally. 8 But, to date, there just hasn't been the 9 appetite to do that. 10 SENATOR DEFRANCISCO: You mentioned that you 11 would like to state to do what the Governor was able 12 to negotiate, as far as limit -- different 13 contributions for state employees. 14 Why was -- what's different in his 15 negotiations with the units that he negotiated those 16 changes with, than the units that you would have to 17 negotiate the same changes with on the local level? 18 PETER BAYNES: Well, I think one difference 19 is, that for, virtually, all of our members, public 20 safety is the biggest -- is the biggest component of 21 their budget and of their negotiations. 22 And not to say the State doesn't provide 23 important services, but the services provided at the 24 local level, especially by public-safety employees, 25 are things you can't -- you can't threaten to lay 1 them off. You can't send out -- you don't want to 2 be in a position where you're sending out pink slips 3 and saying they're effective in a week, to see if 4 they'll come to the table. 5 So, it's a bit of a different dynamic. 6 SENATOR DEFRANCISCO: But that's my point. 7 The success that the Governor had was not in 8 those units. It was with other units where you had 9 those capabilities to use that as a negotiating 10 tool. 11 And my point is: Are there other similar 12 units, other than police and fire, at the local 13 level, that negotiations can lead to the desired 14 result at the local level? 15 PETER BAYNES: We would hope so. But, again, 16 Triborough, as a backstop, has played out, where, 17 the non-public-safety unions wait to see how the 18 public-safety-union contracts play out. And then 19 you have this pattern bargaining that goes from 20 there. 21 So, until police or fire go first and get 22 their deal, it's very difficult to get a good deal 23 with the other units. 24 I think where you've seen success at the 25 local level, and -- in reigning in costs, is in the 1 management-confidential area, where you don't 2 have -- you know, you don't have the 3 union-collective bargaining limitations. 4 SENATOR MARTINS: Thank you very much. 5 PETER BAYNES: Thank you. 6 SENATOR MARTINS: Next we have 7 Patrick Malgieri, who's co-leader of municipalities 8 and local agencies industry team. 9 Good afternoon. 10 PATRICK MALGIERI: Good afternoon. 11 Thank you very much. 12 Change my glasses so I can see what I'm 13 reading, but, thank you. 14 Senator Martins, I want to thank you and the 15 members of your Committee. 16 As you said, my name is Patrick Malgieri. 17 I am a member of the law firm of Harris Beach, and 18 which, as you noted, I do co-chair the firm's 19 municipalities and local agencies industry team. 20 I'm also privileged to have been among the 21 founders of the NYMUNIBLOG, which is a vehicle, 22 whereby, municipal leaders and thought leaders in 23 the field have a resource, not only to learn about 24 recent developments in the municipal law and the 25 political theaters surrounding that, but an 1 opportunity to share their thoughts and experiences 2 in this area. 3 I and my colleagues at Harris Beach are 4 called upon almost every day to assist our municipal 5 and school-district clients as they struggle with 6 the, largely, fiscal challenges presented by the 7 economic climate which we all confront today. 8 Yet, it would be a mistake to think that the 9 struggles that they confront are solely, or even 10 largely, a result of the so-called "Great Recession" 11 and its widespread fallout. 12 Surely, those issues were exacerbated, and in 13 some cases, to levels not experienced in over 14 80 years. 15 But, as I suspect, most municipal officials, 16 and, clearly, those who testified before you today, 17 would indicate those issues existed before the 18 nationwide fiscal crisis. And barring some 19 fundamental and unanticipated change of affairs, 20 will be there in the future. 21 And while much attention has been deservedly 22 been given -- deservedly been given to the plight of 23 upstate cities, the issues respect no arbitrary 24 boundary lines, location, or political persuasion. 25 The problems may exist to a greater or lesser 1 extent, or may have similar or unique 2 characteristics, from municipality to municipality, 3 but they do exist throughout, virtually, all of our 4 states. 5 We have concededly witnessed a growing 6 recognition of the problem and a sense of urgency 7 about finding solutions by Governor Cuomo and the 8 members of the State Senate and Assembly. 9 And while none of those have been panaceas, 10 and some have not always embraced by municipal or 11 school-district officials, they do at least reflect 12 the quickening desire on the part of state lawmakers 13 to stem the tied of factors that are steadily eating 14 away at both the fiscal stability of municipalities 15 and the capacity of our taxpayers to carry the 16 burden. 17 Thus, the real-property tax cap, which has 18 been mention on a couple on instances, most recently 19 by Peter, was enacted in an effort to ease the 20 financial burden on local taxpayers. 21 The Comptroller's decision to establish the 22 system to monitor the signs of municipal fiscal 23 stress, which opened up this hearing, and the recent 24 creation of the financial restructuring board 25 reflect a desire to assist municipalities in better 1 identifying the sources of their fiscal woes, and 2 improve the effectiveness of their efforts to 3 respond to them. 4 And the establishment of regional 5 economic-development councils, and the enactment 6 most recently of START-UP NY, evidenced a commitment 7 to assist municipalities and, indeed, the state as a 8 whole, to grow out of this chronic state of fiscal 9 distress through broader, bolder, and more strategic 10 economic development. 11 But the question does remain, Is it enough? 12 Buffalo, Rochester, Syracuse, Utica, 13 Binghamton, the names are different but the litany 14 is not. 15 Declining, aging, and an increasingly poor 16 population, shrinking tax base, aging costly 17 infrastructure, and declining revenues, coupled with 18 growing health and pension costs that have been 19 talked about throughout the hearing today, for some 20 of our municipal clients, the situation is 21 exacerbated by the presidents of -- excuse me, the 22 presence of tax-exempt properties, again touched on 23 today, making up, generally speaking, one- to 24 two-thirds, and in one instance of one of our 25 clients, over 90 percent, of its total assessed 1 valuation. 2 It begs the question: When, where, and how 3 does this stop, or at the very least, slow down? 4 Just how long can New York's municipalities, 5 such as its upstate cities, survive, nevermind 6 thrive, in this century under a legal and corporate 7 structure that was largely derived from the 8 nineteenth? 9 For the most part, the discussions about the 10 financial future of our state's municipalities have 11 involved two principal solutions: 12 Increased State aid, coupled with mandate 13 relief; and the imposition of a financial-control 14 board, a form, if you will, of financial 15 receivership. 16 The Governor has made clear that there will 17 be no material increase in State aid to 18 municipalities in his call for a budget. 19 And the calls for mandate relief have, for 20 many years, largely been addressed at the margins. 21 Calls for relief from or reform of the 22 Wicks Law, Triborough, and other similar 23 far-reaching measures which make their way into the 24 annual legislative programs of organizations, such 25 as NYCOM, the Association of Towns, the Association 1 of Counties, and the New York State School Boards 2 Association, have almost, inevitably, failed or been 3 ignored, and by all appearances, will likely 4 continue to be. 5 Control boards resorted to, most notably in 6 Buffalo and Yonkers, Nassau County, being among the 7 morse recent municipalities, constituted deeply 8 controversial State-imposed response to a 9 municipality's fiscal plight. 10 While a control board may serve as a vehicle 11 to address at least some of the locally created 12 impediments to recovery, such as controlling 13 employee wages and health benefits, it carries with 14 it the perception or the reality of loss of local 15 control, political and governmental 16 irresponsibility, failure of governance, and the 17 specter of broken promises and commitments. 18 The results may yield a municipality that can 19 weather the short-term problems, at least to the 20 extent those problems were attributable to local 21 decision-making. 22 They may not, however, do much toward 23 resolving the longer-term structural issues 24 bedeviling New York cities and municipalities. 25 Some of our municipalities may be able to 1 grow their way out of the financial crisis they 2 confront through vigorous, strategic, and 3 well-conceived economic-development efforts. 4 For the smaller municipalities, such as the 5 village of Honeoye Falls mentioned today, lacking 6 the requisite size and mass, their ability to 7 successfully pursue this path will likely require 8 greater regional efforts and cooperation, as we've 9 seen started under the Governor's regional economic 10 development councils. 11 But even these efforts raise difficult 12 questions for municipalities. 13 For example, as the upstate economy, in 14 particular, transforms from its historic 15 manufacturing base, municipalities increasingly find 16 that the largest employers within their boundaries 17 are, as has been noted in several occasions in this 18 hearing, colleges, universities, health-care 19 providers, and other large not-for-profits. 20 And while they produce increasing employment 21 opportunities and drive other engines of economic 22 development in their host communities, they are, as 23 has been noted, largely exempt from real-property 24 taxes, the principal source of revenue that funds 25 the operating cost of local governments and school 1 districts. 2 Economic development initiatives at the local 3 and state level, such as the recently enacted 4 START-UP NY, also rely heavily on real-property tax 5 abatement, or, in the case of START-UP NY, complete 6 exemptions. 7 Again, they do offer the prospect or the 8 realization of increased employment, as well as 9 numerous other benefits to the communities in which 10 they are located, but they do not include the full 11 benefit, if you will, of real-property taxation. 12 It is not to say that these exemptions or 13 abatements should be abandoned or materially 14 curtailed, far it from, but they do serve to shed 15 some light on the difficulty that New York's 16 municipalities face in funding their opposition -- 17 operations on a sustainable basis, even while 18 witnessing the growth of economic activity within 19 their own borders. 20 So, as we asked in the NYMUNIBLOG at one 21 point: Is there a "third way"? 22 Is there another route by which New York's 23 localities might better address the systemic issues, 24 that with greater frequency and intensity, are 25 giving rise to their fiscal problems? 1 The business model for upstate's cities no 2 longer appears to be sustainable. 3 The need has never been more apparent or 4 compelling for a wholesale critical review of what 5 we expect from all levels of our government: what we 6 expect them to do, which levels of government are 7 best able to perform which services, and which types 8 and methods of payment for those services are most 9 efficient and equitable. 10 Such a review will not be easy to come by. 11 Government almost always acts or reacts 12 incrementally, and rarely with singularly bold 13 transforming or far-reaching solutions. 14 The so-called "grand bargain" of the kind 15 embodied in the likes of the early New Deal 16 legislation, or the Marshal Plan for post-war 17 Europe, come about only in the most infrequent of 18 circumstances, and typically in response to the most 19 shattering or threatening and widespread challenges. 20 Provoking lawmakers at all levels of New York 21 government to undertake a serious top-to-bottom 22 review of how we govern ourselves in this state 23 would require a nearly unprecedented willingness to 24 forgo assumptions, preconceived notions, and 25 territoriality. 1 In short, a commitment to write a plan of 2 government on a clean, or nearly clean, slate. 3 The challenges in this regard do not rest 4 solely on the state level. 5 Although much is made of the impact of State 6 mandates, resistance to fundamental change is 7 equally daunting, and perhaps even more complex, at 8 the local level among municipalities and their 9 elected officials. 10 The calls for reform and relief will require 11 a similar commitment from lawmakers at all levels of 12 local government as well. 13 Once again, Senator, and members of your 14 Committee, on behalf of my colleagues at 15 Harris Beach, I want to express our gratitude at 16 having this opportunity to present this testimony to 17 you and your fellow Committee members. 18 And I'd be delighted to answer any questions 19 that you may have. 20 SENATOR MARTINS: Thank you. 21 Thank you, I appreciate that. 22 And I appreciate the broader-stroke approach 23 to this issue that you brought to the floor. 24 And when we look at the challenges; 25 specifically, the challenges from many of our cities 1 in Upstate New York, you know, we went over part -- 2 partly went over, with Mayor Miner, but, when you do 3 have an issue of poverty, and increased levels of 4 poverty in our cities, greater need for public 5 assistance in those cities, a shrinking tax base, an 6 industrial base, and perhaps a middle class that has 7 moved away, or is in the process of moving away, it 8 paints a much starker picture of what we're dealing 9 with outside of the realm of the decisions that are 10 necessary for the individual communities to make, 11 like, health care and pension costs, because there 12 are broader issues here that we need to discuss. 13 PATRICK MALGIERI: Correct. 14 SENATOR MARTINS: Senator DeFrancisco is 15 hosting a number of hearings across the state, 16 starting in a couple of weeks, dealing with the 17 state's tax structure, on a statewide basis. 18 Why are businesses leaving New York State? 19 Why are businesses relocating? 20 Why are those jobs moving elsewhere? 21 And what should we be doing, as a state? 22 Because, if we can handle that issue, I also 23 believe that the issue for our cities, especially 24 those cities that were the industrial core of this 25 country, in Upstate New York, for so long, we begin 1 to address the fundamental issues facing our 2 municipalities. 3 And that becomes part and parcel of this 4 question: 5 How do we revitalize those communities? 6 How do we bring businesses back? 7 How do we create a better tax structure, and 8 a better environment; not just, how do we deal with 9 the current structure? 10 PATRICK MALGIERI: And I won't dispute that. 11 And I think any -- there's clearly a link 12 between the economic health of the community, and, 13 the health of the municipality itself, as an 14 independent structure. 15 But, it's not necessarily true that, because 16 you may have a healthy private-sector economy, let's 17 say, within the bounds of your municipality, that 18 your municipality itself may be experiencing a 19 reversal of its economic fortunes. 20 Even in Detroit, in the face of bankruptcy, 21 there's a fair amount of evidence to support the 22 growth of the private sector, and surprising growth 23 of the private sector, within the boundary of 24 Detroit. 25 But that has not translated to, obviously, to 1 the success for Detroit, as a municipal entity, as 2 an operating entity, because they're not necessarily 3 synonymous. 4 They're linked; there's no question that 5 they're linked. And there's no question that a 6 viable -- a healthy and viable private sector that 7 is able to generate jobs, generate profits, generate 8 income, generate tax revenue, for the municipality, 9 is important for a municipality. 10 But, the mere fact that you have that, in and 11 of itself, does not necessarily translate to success 12 for a municipality, in order to deal with its own 13 issues and its own obligations. 14 SENATOR MARTINS: But the opposite also may 15 be true. The fact that you don't have that -- 16 PATRICK MALGIERI: I agree with that. 17 SENATOR MARTINS: -- certainly puts a 18 significant burden on the prospects of a 19 municipality being able to address those issues. 20 PATRICK MALGIERI: Absolutely correct. 21 Absolutely correct, and I think that's the 22 story of Upstate New York. 23 And I realize, as I said, there's a lot of 24 attention been given to upstate, and understandably 25 and justifiably so, but, it's true, obviously, in 1 other parts of the state. 2 Downstate, the cities in Westchester County, 3 are -- you know, Mount Vernon, New Rochelle, even 4 Yonkers, they're all facing very similar challenges. 5 So there's no question that the absence of a 6 healthy tax base, the absence of a growing economic 7 base, is one of the root sources of the problems 8 that municipalities, particularly cities, are 9 facing. 10 SENATOR MARTINS: Thank you. 11 PATRICK MALGIERI: Thank you very much, 12 Senators. I appreciate it. 13 Have a good day. 14 SENATOR MARTINS: Our next witness is 15 MRB Group; Diana Smith, director of business 16 development. 17 Mayor Smith, good to see you again. 18 DIANA SMITH: Good to see you, Senator. 19 My remarks today will be fairly narrow in 20 focus, and really suggest that there's much more 21 that can be done to help local governments help 22 themselves. 23 First, Senator Martins, let me thank you for 24 bringing together officials from throughout 25 Upstate New York, to discuss the many challenges 1 faced by local governments. 2 And, thank you, Senator Valesky, for also 3 listening, and for your support. 4 I'm very confident that the critically 5 important testimony provided today will certainly 6 lead to a stronger state and local partnership, 7 benefit the taxpayers that local governments work so 8 diligently to serve. 9 And, Senator, as Chairman of the Committee on 10 Local Government, you're a tireless advocate for our 11 municipalities. We're very fortunate to have you 12 serve in that capacity, and provide your direct 13 knowledge of municipal leadership and its challenges 14 to your colleagues in the Senate. 15 So, I'm grateful today for this opportunity 16 to share a unique perspective; that of, both, a 17 former village official, having served as both 18 trustee and mayor of Seneca Falls, for a total of 19 11 years; 20 And that, also, of an 86-year-old municipal 21 services organization, MRB Group, which currently 22 works with nearly 100 New York State municipalities, 23 helping to maintain infrastructure, and provide 24 services to central functions of a local government, 25 in the most cost-effective manner. 1 The specific topic that I would like to 2 address today is the State's initiatives to provide 3 incentives for dissolution and consolidation, as 4 well as Department of State resources in the form of 5 local government efficiency grants. 6 One would presume that these programs support 7 local government in their efforts to lower costs to 8 taxpayers, because they eliminate duplication, and 9 lead to an economy of scale. 10 Because of my direct experience with the 11 dissolution of Seneca Falls, and because I have the 12 benefit of having spoken with, literally, hundreds 13 of mayors and town supervisors from across the state 14 about their experiences as community leaders, I can 15 tell you with some certainty, that most local 16 government officials do not sense support from these 17 initiatives. 18 I can confidently state further, that the 19 presumption of efficiency associated with the 20 effects of these programs should be questioned. 21 First, I would like to establish a personal 22 position. 23 While I did not support the dissolution of 24 Seneca Falls, a village with a population of 6800 25 that represented 73 percent of the town's 1 population, I'm not against dissolution; and, 2 actually, would encourage communities to willingly 3 undertake the critical self-analysis that's 4 associated with the dissolution study. 5 The self-analysis is extremely beneficial, 6 and advocating for such introspection is the basis 7 of much of my work in my post-mayor career. 8 There are many reasons, though, that mayors 9 and supervisors are reluctant to participate in 10 local government efficiency grants that promote such 11 exploration. 12 Even a study fully funded by the 13 Department of State is avoided by many municipal 14 leaders who fear that the path leads to inevitable 15 presumptions and misinformation, and worst of all, 16 political exploitation, that can literally divide 17 and devastate a community. 18 Last year, I was asked to provide suggestions 19 to the Department of State that I believe would 20 enhance participation in the local government 21 efficiency programs. 22 And then, this year, I shared some additional 23 recommendations with the Governor's adviser on local 24 government. 25 And with your permission, I'll share 1 highlights from those recommendations. 2 Our experience at MRB Group, in speaking with 3 community leaders across the state, has been fairly 4 consistent. 5 When consolidation or dissolution is on the 6 table, there is an implicit assumption, before any 7 other discussion, that combining governments is the 8 desired objective. 9 Asking community leaders to embrace 10 dissolution or consolidation is somewhat contrary to 11 their sense of duty. Each participating entity's 12 leadership, sworn to uphold their responsibility to 13 their own constituents above all else, is 14 immediately postured to protect their community's 15 interests, understanding that their partner 16 community's leadership will do the same. From the 17 very beginning, an adversarial atmosphere is 18 established. 19 I have heard terms, like, "hostile takeover" 20 described by mayors. And whether warranted or not, 21 this sensitivity dooms an efficiency exploration. 22 MRB Group's suggested approach to the 23 Department of State: Start at the beginning, with 24 one community, with a focus on efficiency. 25 Communities should begin the process of 1 exploring efficiency by looking within, if they 2 haven't already done so, through a community 3 planning process. They should identify the key 4 characteristics of their community, its important 5 services, and quality of life. And, they should 6 then explore, choose, and implement efficiency 7 models that are compatible with and support these 8 values. 9 Communities should be allowed, even 10 encouraged, to pursue exploration of all possible 11 avenues to achieve efficiency. 12 Everyone agrees, lower costs are desirable. 13 The ideal place to begin exploration is with 14 an acknowledgment of possibilities, even those that 15 represent significant change. 16 This is only possible in a non-threatening 17 environment. 18 Exploring efficiences should include, but not 19 be limited to, sharing services; internal -- 20 internal reorganization and restructuring; sharing 21 equipment, facilities, and manpower; consolidating, 22 administrations; cross-training personnel; 23 dissolving departments; outsourcing functions, or 24 partial functions. 25 Equally deserving of consideration is 1 consolidation or dissolution. 2 But we believe, with an approach that places 3 focus on the unique needs of one community rather 4 than immediate discussion of compromise between two, 5 more opportunities will be carefully considered, 6 more can be accomplished in a non-threatening and 7 creative environment of collaborative discussion. 8 With this model, opportunities, including s 9 collaboration with private entities or other 10 unlikely partnerships, can also be more fully 11 explored. 12 We're pleased that the Department of State 13 has been listening. 14 The language within the grant requirements 15 now, in 2013, acknowledge consideration of 16 functional consolidations and restructuring within a 17 single community, but still states that, quote, 18 "Generally, local governments must apply 19 cooperatively for an LGE grant; however, in certain 20 instances, the program can provide direct assistance 21 to fiscally stressed local governments." 22 If efficiency is the goal, then why wait for 23 a community to be fiscally stressed? 24 Why should the community that has planned 25 wisely; or, perhaps, been fortunate that no economic 1 crisis has yet occurred; no major employer has left, 2 such as in Honeoye Falls; no supplemental-revenue 3 source has been taken away, such as in Minoa -- we 4 heard from Mayor Donovan -- why should that 5 community be ineligible to participate in programs 6 that support better operations or reduce the cost of 7 government services? 8 As Mayor Miner so wisely pointed out earlier, 9 when you wait for a crisis, your options are 10 narrowed. 11 If performing the self-analysis that would 12 identify opportunities to increase efficiency, opens 13 the door to discussions and explorations of all 14 possibilities, then wouldn't it make sense for the 15 LGE programs to start there? 16 Local government, by its very nature, is the 17 most responsive and efficient form of government. 18 I can't say this often enough. 19 Mayors, boards, and councils must answer 20 directly to their constituents, because those 21 constituents are the family members, the neighbors, 22 the co-workers, the friends, that they see each and 23 every day. 24 Citizens participate actively in their local 25 governments, and this forces better and greater 1 communication. Ideas are exchanged, and 2 disagreements lead to enhanced decision-making. 3 This is precisely why local governments are 4 where best practices and the greatest efficiencies 5 are most often created. 6 Participation, communication, and 7 responsiveness, these are demonstrations of 8 democracy at its finest, and you'll find them, most 9 often, in local government. 10 So, instead of targeting local government and 11 implying that they're raught with inefficiency, and 12 perhaps the source of New York's problems, we need 13 our partners at the state level to be true partners 14 and support local government. 15 Senator Martins, you've done so much to do 16 that. And, your effort to invite local community 17 leaders to these proceedings, and ask for their 18 input, proves that you do respect and value local 19 government. 20 Thank you for this important acknowledgment. 21 And as we go forward in search of the 22 answers, mayors and supervisors across the state 23 will certainly appreciate your strong support. 24 25 1 SENATOR MARTINS: Thank you, I appreciate it. 2 Mayor, you know -- and I appreciate you being 3 here today, because that perspective; the 4 perspective of having actually gone through the 5 process, and providing some insight, is important. 6 You know, we hear so much about the need for 7 consolidation and efficiencies, but the process 8 itself, oftentimes, leads to just the opposite. 9 So, the perspective you bring is important, 10 and, certainly, your participation here is 11 appreciated. 12 Thank you. 13 DIANA SMITH: Thank you very much. 14 SENATOR MARTINS: Next we have the mayor of 15 the village of Prospect, and the village clerk; 16 Mayor Francis Righi, and Village Clerk Marcia Ellis. 17 Welcome, good afternoon. 18 MAYOR FRANCES RIGHI: Good afternoon. 19 SENATOR MARTINS: Thank you for joining us 20 this afternoon. 21 MAYOR FRANCES RIGHI: Thank you for having 22 us. 23 I'm Mayor Righi, and, my clerk/treasurer, 24 Marcia Ellis. 25 We're from the village of Prospect, which is 1 30 miles -- we're about 30 minutes north of Utica, 2 New York. We have a population of 291, about 3 129 homes in our village. 4 And, we do -- we were doing very well, until 5 June, when the Oneida County Self-Insurance 6 Compensation Board came to us. 7 We had a firefighter injured in 2009 at a 8 firefighter's function. 9 This firefighter has been collecting comp 10 since then. 11 The board came to us in June with some 12 figures that are just overwhelming. 13 I raise $28,000 a year in taxes. 14 If we don't settle this case, and we pay for 15 the next, they figure, 34 years, my compensation 16 premiums will be $44,000 a year. 17 If we settle, and she's -- this firefighter 18 is awarded $101,000, the village of Prospect will be 19 required to repay the compensation board over 20 $400,000. 21 This year, our premium went -- it went from 22 $308, this year we paid $19,013. 23 Next year, it will be $28,500, if we settle. 24 But in 2015, our premium will be $72,700. 25 SENATOR MARTINS: Off of the $28,000 tax 1 base? 2 MAYOR FRANCES RIGHI: Yes, yes. 3 What we are doing right now -- 4 MARICA ELLIS: Even if we raise taxes, our 5 population is like everyone else's: aging. 6 A lot of them are on fixed incomes. 7 So we can raise the taxes through the roof, 8 but people can't afford to pay them. 9 So... 10 MAYOR FRANCES RIGHI: I did speak to 11 Legislator Mike Waterman, who is the chair of the 12 committee, and asked him if our board could meet 13 with his committee, so we could discuss, maybe, 14 changing the repayment plan. 15 And he told me that, if he changed it for 16 Prospect, he'd have to change it for everybody. 17 So, we're kind of stuck with this. 18 We have talked -- 19 MARICA ELLIS: Tell them about the rest of 20 the premiums, because it doesn't stop there. 21 MAYOR FRANCES RIGHI: No, it peaks at, 2015, 22 at 72,700. Then it goes to, 71,000; sixty-two-five; 23 fifty-three-six; 45,000; for a total -- and then 24 there would be an additional premium of 81,865, for 25 a total of $443,549 paid back. 1 We are now in the process of dissolving our 2 fire company. We have been talking to the town 3 about getting coverage from other fire companies. 4 We can't afford to carry the liability 5 anymore. 6 I mean, if there was another compensation 7 case, I mean, we're already in trouble as it is. 8 So, we are talking to the town, and we are 9 looking into dissolving our fire company. 10 We have also talked to the town about 11 dissolving the village also, and becoming a hamlet 12 of the town of Trenton. 13 Unfortunately, that won't lift the burden of 14 this from the 129 homes in our village. What will 15 happen is, the county will levy this burden against 16 those homes. 17 So, we feel like we're kind of stuck between 18 a rock and a hard place right now. And, we have 19 been exploring every option. 20 I've been talking -- our County Legislator 21 Phil Sacco has been working tirelessly, trying to 22 help us to figure out how to pay for this. 23 When I asked -- when I -- when we first were 24 confronted with these numbers, I asked why the 25 firefighter was getting such a large amount for the 1 injury. 2 And I was told that this board does not do 3 classification, like most compensation boards. They 4 do loss of wages. 5 And -- 6 MARICA ELLIS: Earning capacity. 7 MAYOR FRANCES RIGHI: Right, earning 8 capacity, and that's why the settlement is over 9 $100,000. 10 So, you know, if we had gone with, maybe, a 11 $30,000 claim, we could have gotten through this, 12 but, it's just -- it's through the roof. 13 So that's where we're at. 14 MARICA ELLIS: Unfortunately, every 15 municipality or entity that participates in this 16 Oneida County self-insurance plan faces the same 17 risk that we have right now. 18 And it's, like, the comp board could care 19 less whether or not the village can survive this or 20 not. 21 But, if any other firefighter or policeman 22 gets injured in another municipality, that 23 municipality will face the same catastrophic 24 financial burden that the village is. 25 There are 48 municipalities -- 1 MAYOR FRANCES RIGHI: 49. 2 MARICA ELLIS: -- 49 in the Oneida County 3 plan, and 48 of them have claims. 4 MAYOR FRANCES RIGHI: Where is that sheet 5 that shows what they pull in? 6 SENATOR VALESKY: Well, excuse me for just 7 one second. 8 I don't see the representatives from the 9 Comptroller's Office still with us. 10 Have you brought this matter to -- 11 MARICA ELLIS: I brought it to 12 Oneida County's Comptroller. 13 SENATOR VALESKY: The county. 14 MARICA ELLIS: It's an Oneida County 15 self-insurance plan. And we've been told it's 16 pretty much isolated to Oneida County. 17 I don't know if that's totally true or not. 18 MAYOR FRANCES RIGHI: We did FOIL the County, 19 because we were not -- we just didn't seem to be 20 getting any answers. 21 Prospect has been in this compensation board, 22 you know, this plan, since 1932. 23 And, in 1932, when we -- Prospect passed a 24 local law, the board was governed by the supervisors 25 of the towns. 1 Somewhere in the late'60s/early '70s, 2 there was a change, and that's when it became, not a 3 compensation board, but a self-insurance board. 4 I think that's where the -- where things 5 started to change. 6 And, instead of the town supervisors 7 overseeing this board, it's now our legislators. 8 They are appointed to the board, our county 9 legislators. 10 So -- 11 SENATOR MARTINS: Aside from this issue, 12 because it is a catastrophic issue, and if we look 13 at the history of fiscally distressed cities and 14 municipalities from around the country, one of the 15 causes that lead municipalities to seek bankruptcy 16 protection is precisely this: an unforeseen 17 circumstance and liability that's come to the fore. 18 And, so, but for this issue, I'm assuming 19 that the great village of Prospect would be fine? 20 MAYOR FRANCES RIGHI: We were doing great. 21 SENATOR MARTINS: Stable? 22 MAYOR FRANCES RIGHI: Yes. 23 SENATOR MARTINS: And that this unforeseen 24 circumstance, this accident, and the resulting 25 liability, that has placed the burden on your tax 1 base, that has you now questioning your viability of 2 your own village? 3 MAYOR FRANCES RIGHI: Yes, absolutely. 4 We actually had a lot of projects slated for 5 this year. You know, updating old infrastructure. 6 We've updated our lighting in the past 7 three years. 8 We were going to do more things to make the 9 village more efficient. 10 Fix our clock. 11 It's a wonderful village. 12 SENATOR MARTINS: And, obviously, I wish I 13 could give you an answer now, and I know 14 Senator Valesky would join me in that wish as well. 15 But, let's take this forward. Certainly, 16 we'll stay in touch. 17 But this is a -- just an important example of 18 circumstances that sometimes do confront many of our 19 municipalities, an unforeseen circumstance that, 20 literally, but for that, you'd be fine. But because 21 of that, it jeopardizes the very viability of the 22 municipality, going forward. 23 I don't know if that there is a structure in 24 place. I'm not aware of one. 25 But, it is certainly a wake-up call for me. 1 Let's take a look at it. I have your contact 2 information. 3 MAYOR FRANCES RIGHI: Okay. 4 SENATOR MARTINS: And I would appreciate the 5 opportunity to circle back after we've had an 6 opportunity to have a discussion on this issue. 7 Because, I'm rather surprised that we would 8 not have a state policy on this issue as well. 9 Perhaps this is something we need to look at. 10 MAYOR FRANCES RIGHI: So, Senator, "MVCC" is 11 part of this program, Mohawk Valley Community 12 College, and their premiums a year are over 13 $300,000. That has to be impacting tuition. 14 I know everybody is trying to make -- 15 $326,569, so, that has to impact tuition costs. 16 And I know -- 17 SENATOR MARTINS: Mohawk Valley Community 18 College? 19 MAYOR FRANCES RIGHI: Yes. 20 It's unreasonable. 21 SENATOR MARTINS: Well, Mayor, thank you very 22 much. I certainly appreciate it. 23 But, if you would, before we leave, let me 24 just get some contact information from you after 25 this hearing, and let's try and circle back. 1 MAYOR FRANCES RIGHI: Wonderful. Thank you. 2 SENATOR MARTINS: It's been a pleasure. 3 Thank you very much for bringing this to our 4 attention. 5 I want to take the opportunity, again, to 6 thank the city of Syracuse, and in particular, 7 Mayor Miner, for hosting, allowing us to hold this 8 hearing here in the great city of Syracuse. 9 I want to thank my colleague Senator Valesky 10 for having joined us today. 11 Certainly, looking forward to challenging -- 12 to addressing these challenging issues with you as 13 we go into this next legislative session. 14 And, I also would like to thank, of course, 15 Senator DeFrancisco for having joined us for this 16 hearing as well. 17 It was a good hearing. 18 We got a lot of great information; a lot of, 19 I think, insight into the issues facing our local 20 municipalities. 21 And I think we do have some direction from 22 which we can now take some of our next steps. 23 But, for everyone who participated today, 24 thank you, and looking forward to working with you 25 as we go into this next legislative session. 1 SENATOR VALESKY: Just one final, in terms of 2 completing your schedules: 3 So, for the record, you'll be in Buffalo on 4 Thursday; correct? Erie County on Thursday? 5 SENATOR MARTINS: We'll be in Buffalo, in 6 Erie County, yes, on Thursday, similar hearing, 7 starting at 11:00. 8 And the focus there will be similar to the 9 focus we had today, but we'll also add the 10 additional dimension of having a -- a representative 11 from the control board present will be present, to 12 talk about their experience as a control board, when 13 it comes to addressing those issues particular to 14 Erie County, and to, certainly, Buffalo, through, 15 you know, representatives from the city government. 16 And then, a week from today, next Tuesday, 17 the 27th, we will be in Nassau County, where we will 18 be again having similar discussions. 19 The thought, and the hope, is that, not only 20 do we get broad strokes from different parts of the 21 state, but we also come up with, hopefully, some 22 best practices, when it comes to those areas where 23 the state has had State intervention through these 24 control board. 25 What's worked, what hasn't worked, how do we 1 make the process better, in the event that it does 2 become necessary in the future, for us to look 3 towards a future instance of intervention through a 4 control board? 5 What lessons have we learned, and what 6 lessons should we take forward? 7 So, thank you again, Senator Valesky. Always 8 a pleasure. 9 Have a wonderful afternoon. 10 Thank you. 11 (Whereupon, at approximately 1:40 p.m., 12 the public hearing held before the New York State 13 Senate Standing Committee on Local Government 14 concluded, and adjourned.) 15 16 ---oOo--- 17 18 19 20 21 22 23 24 25