Is Yonkers broke? Only in the strictest sense of the word. Do the city’s liabilities exceed its assets? Yes—by a lot. Does the city spend more than it takes in? Yes—also by a lot. On the other hand, can the city pay its bills? No problem. All of them, forever? Almost certainly.
As Mayor Mike Spano points out, “In the last two years, we have adopted three balanced budgets that were within the tax cap. We did not make significant cuts in staffing but we did deal with two pretty significant budget deficits. But we still have a couple of tough years ahead of us.”
Actually, it may be longer than that. According to the most recent financial analysis published by the city, as of 2012, Yonkers’ liabilities exceeded assets by $469.5 million. That’s a big number, but the liabilities aren’t all strictly bonded debt—a big chunk ($520 million) are actually what is known as “Other Post-Employment Benefit Obligations,” or a financial projection of retirement benefits above and beyond pensions, which are paid to retired City of Yonkers employees. Excluding the “Other Post-Employment Benefit Obligations,” Yonkers’ net long-term debt has grown from $441 million to $526 million, or $2,230 to $2,687 per capita, since 2007.
What might be more pressing is the annual gap between income and outgo in the city’s operating budget. Spano’s statement that the budget is balanced is correct, but it took some quick footwork to get there. The $991-million 2014 budget used $22 million in pension amortization; $10 million in borrowing for certioraris (appeals for lower property tax bills); and $39 million drawn from various fund balances to offset the difference between expected income and projected operating expenses for the year. That practice, known as “one-shots,” has been common for years in Yonkers (and throughout Westchester). It’s kind of like taking out a second mortgage on your house every week to buy groceries.
Beyond 2014, the most recent four-year financial plan shows annual revenue shortfalls of $121 million (2015) growing to $133 million (in 2017) without tapping fund balances or other one-shot items. Those deficits are also conservative, since they include some relatively generous assumptions on state aid by the Board of Education, and don’t take into account the fact that city employees have been working without a contract for five years. For example, at the time the projections were made, the city’s new agreement with the police union for a retroactive (to 2009) 2.35-percent annual pay increase hadn’t been negotiated.
Richard Brodsky, a former state assemblyman who served on a commission set up to review the city’s finances, concludes that the situation is far from hopeless. “Phasing out the gimmicks will be difficult but not impossible,” he says. “It will require participation by the state and the feds…and will require sacrifices within the city.”
Brodsky also points out that the problem is bigger than Yonkers. “The model for cities is broken,” he explains. “It was predicated on having big private sector anchor taxpayers. Yonkers had Otis, but they’re gone! You can’t continue as if the tax base of the city is the same as it was 30 years ago.”
Yonkers gets almost a third of its revenue from property taxes but, like everywhere in Westchester, the tax base is declining. For Yonkers, the total assessed value has declined from $518 million to $484 million from 2007 to 2012. The tax rate per $1,000 of property valuation has been driven up accordingly, from $503 to $655, in the same period.
A major factor in the Yonkers budget gap is the school system, which represents more than half of the city’s budgeted expenses. Even though school enrollments are growing (up 6 percent from 2008 to 2012), state aid is flat and federal aid has disappeared. Those cuts have resulted in the loss of 628 public-school jobs during the last four years, while the number of students has increased by 1,505.
“The state school aid formula has hurt Yonkers for 50 years,” Spano says. “The state funds 98 percent of the school infrastructure needs of Rochester, Buffalo, and Syracuse, but doesn’t come close to that number with the city of Yonkers.”
State and federal aid, by the way, is the largest single source of revenue for Yonkers, representing nearly 40 percent of the city’s total income. Given downward pressure on federal spending, it’s not likely to grow without some significant lobbying and/or some serious pushbacks at the deficit hawks in Washington.
Yonkers is taking some other steps to bring the city budget into balance with fewer one-shot fixes. Many vacant properties are delinquent on their taxes, for example, so the city has begun a property inventory that is expected to find 400 vacant buildings. Spano also called for a reassessment of all properties (as have several other municipal officials in Westchester) but moving that proposal along may take more than a couple of years—a shame when you consider that 36.8 percent of the properties on the tax rolls in Yonkers are tax exempt.
Yonkers isn’t broke, nor is it the only city in New York State or the nation suffering from fungus of the financials. Despite the problems, Standard & Poor’s gave the city’s debt an A+ rating last year, an indication that the city has adequate capacity to meet its financial commitments.
Spano is upbeat, too. “We will continue to try to be smart about the dollars we have,” he says. “We can’t just pass the debt down to someone else. I’m realistic about the issues, but there are good things happening in this city.”
