February 3, 2010

Ithaca Struggles to Make Budget Cuts

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A five percent cut in funding from New York State and a 7.8 percent drop in sales tax revenue forced Ithaca city officials in November to develop a restrictive budget that compelled city departments to seek alternative methods of raising revenue. Although the budget successfully closed the city’s $2.5 million deficit, avoided layoffs and prevented large tax increases, officials are still finding it difficult to prioritize their divisions and end practices that had been funded by the city for years.

Approved unanimously by the Common Council, Mayor Carolyn Peterson’s $58.63 million budget raises revenue by ending the current “grace period” for parking tickets, raising property taxes by .65 percent, taking nearly a million dollars from its savings account and employing several creative alternatives.

The budget also saves money by cutting back funding for city agencies and delaying the hiring of some city officials.

Ithaca Controller Steven Thayer described the budget as “the most challenging” project he’d worked on in his 21 years as controller.

“[I] can’t say we’re in dire straits, but things aren’t looking very bright at the moment … we’re trying to spread the cuts as evenly as possible,” Thayer said.

City Councilman Svante Myrick ’09 (D-4th Ward) painted a slightly sunnier picture, stressing that the city did not make “massive cuts.” He added that by closing its budget gap, Ithaca retained an “A” credit rating –– essential to the city’s fiscal health.

Yet it seems clear that city agencies won’t have much room to sustain further budget cuts, which might be necessary if the economic climate does not improve.

For example, the city is saving over $100,000, according to Myrick, by not replacing Ithaca Fire Chief Brian Wilbur, who resigned last year. Instead, they have promoted Tom Dorman, deputy fire chief, to acting fire chief.

Dorman said that although the fire department has been “compensating,” the absence of a fire chief “will catch up to us” within the year.

Superintendent of Streets and Facilities Ray Benjamin described a similarly precarious situation, arguing that further cuts would be unsustainable. He said that although they were “disappointed” by the amount of money they received, they “didn’t get hurt as bad as [we] could have.” Still, he says the cuts have forced the agency into an “emergency mode” where they “don’t deal with something until a problem [develops].” Benjamin added that the current budget shortfall would only make requisite spending more expensive in the future.

City Councilman Eddie Rooker ‘09 (D-4th Ward) also emphasized the need to spend money now to prevent higher costs in the future, particularly for infrastructure.

A large part of the budget shortfall, according to Thayer, is union salaries that guarantee annual increases. Thayer said that these contracts have provisions in which workers must get between three and 4.5-percent raises, making it difficult to reduce budgets when they are consistently spending more and more money.

Human Resources Director Schelley Michelle Nunn illustrated this difficulty, saying that, taking into account salary increases, a 0% budget was “the equivalent of a reduction.” The absence of additional budgeting, Nunn said, had a “major impact” on her department’s discretionary funding, staff development and advertisement, which needed to be reduced in order to compensate for increased salaries.

Thayer said that labor costs account for 70 percent of the city’s budget, and believed that the “next step” would be to reevaluate the labor contracts, if times get worse.

City officials are trying to prepare for yet further decreased state funding and sales tax revenue, should upstate New York’s fiscal situation worsen over the coming years.

One proposal that seems likely to come to fruition –– barring a quick economic recovery –– is changing the current parking policy for downtown Ithaca.

Right now, parking in the Ithaca Commons is free for an hour, but a proposal to eliminate the free hour, which would save the city $200,000, has met fierce opposition from the downtown area’s store owners.

Another potential source of future revenue that officials have tinkered with is lobbying New York State to repeal a law that exempts institutions of higher education from property taxes, according to Thayer.

Right now, 61.3% of Ithaca’s land is tax exempt, primarily because Cornell University and Ithaca College do not have to pay tax revenue, under the current law.

Thayer said that lobbyists are currently trying to get the state to alter the legislation, but that he is not optimistic it will be changed in the near future.

City councilmen and others, though, say that Ithaca is in many ways spared the worst of the economic downturn because of the presence of Cornell University and Ithaca College.

Assistant Superintendent of Department of Water and Sewer Eric Whitney said he believed that this “blessed little town” is “almost insulated” from the truly harsh economic times currently affecting surrounding towns, largely because of the consistent spending of the university and college respectively.

Although Thayer affirmed that the colleges were important in “anchoring” the Ithaca economy, he also said that the schools could have a “negative impact” when, as now, they continue to lay-off staff and put capital projects on hold.

Original Author: Jeff Stein