Comptroller: Local governments’ fiscal health at risk

Local governments across the state continue to be in dire financial straits after experiencing an actual decline in revenues of more than $400 million, or 1.5 percent, between 2008 and 2009, a report from the state comptroller concludes.

An analysis of data from 4,000 local governments and recent municipal audits conducted by Comptroller Thomas DiNapoli”™s office found that “the liquidity of local governments is deteriorating,” according to an Aug. 1 report.

The report states that nearly 300 local governments had deficits in 2010 or 2011 and more than 100 had inadequate cash on hand to pay their current bills.

DiNapoli said the combination of declining revenues and poor financial planning by some local governments could “have a devastating impact on some communities” should any future economic shocks impact the region.

“Difficult choices are ahead, but they start with better long-range planning and an honest conversation about the numbers,” DiNapoli said in a statement. “By preparing more accurate and realistic budgets, local officials will be better able to deal with these issues without overburdening taxpayers.”

The analysis also revealed various issues in 60 audits released during the state”™s 2011-12 fiscal year by the comptroller”™s office.

Thirty audits included findings that officials adopted inaccurate budgets, resulting in surpluses and retention of excess fund balances and leaving taxpayers on the hook for more than was necessary to fund operations.

Thirteen local governments were cited for inadequate recordkeeping that did not provide an accurate portrayal of their true financial conditions and 17 audits identified local governments that, according to the report, had such poor financial systems that they did not know their current financial condition or were unaware of how their actual expenses compared with what they had budgeted for.

For the latter category, Rockland County was the chief offender.

The county”™s general fund balance deficit increased from $39 million on Dec. 31, 2009, to $52 million just 12 months later.

Factors contributing to the higher deficit included operating deficits in various component units of the general fund, the write-off of unpaid real property taxes and penalties owed by a major taxpayer and “questionable budgeting practices,” according to the comptroller”™s report.

Cities are most likely to be affected by revenue shortfalls, DiNapoli said, but the impact of the recession has filtered down to all levels of government.

County sales tax collections, which dropped 5.9 percent during the recession, took three years to recover to 2008 levels.

In Dutchess, Nassau, Orange, Putnam, Rockland, Sullivan, Suffolk, Ulster and Westchester counties, property values declined at an average annual rate of 5.3 percent from 2008 to 2011, leading to significantly lower property tax collections.

Mortgage recording tax revenues have also dropped significantly, with local governments losing nearly $320 million since 2005, the report states.