The Mayor’s proposed General Fund Budget for 2005 requires an 8.77% increase in the property tax rate from $18.54 to $20.16 per $1000 assessed valuation. For the average taxpayer assessed at $60,000 this translates into an approximate annual increase of $97. Total General Fund expenditures are $15.9 million. Budget deliberations for 2005 were an indication that maintaining the fiscal health of the City of Tonawanda in the coming years will prove to be a difficult exercise.

More now than ever there is much uncertainty having to do with factors beyond our control. Our Sales Tax is a direct function of the success, or lack thereof, of the local economy. In addition to the fact that New York State has yet to adopt a budget for 2004, one of our biggest obstacles going forward is accounting for pension costs to the Retirement System. Retirement Costs in the 2005 General Fund budget are estimated to be $1,150,000. The State Comptroller recently negotiated pension reform for state and local governments, which at best simply provides cash flow relief. Instead of receiving our annual bill in December of the current fiscal year the City will receive its bill in February of the following fiscal year. At the time of this presentation it is unknown what impact this will have on our current year financial statement. The question/dilemma is; is the new February 2005 Bill for fiscal year 2004 a 2004 expense or a 2005 expense? The Federal Government Accounting Standards Board (GASB) has yet to rule on this question as it stands today. Clearly, as confirmed after consultation with our auditors, we believe conservatively, that our February 2005 bill should absolutely be treated as a 2004 expense. We believe this is the most responsible way to reflect this in our budget.

At the Departmental level all departments continue to hold the line on equipment and services expenditures. We project no layoff of personnel. Staffing has been reduced through attrition. However, in many cases we have reached the point where further cuts would result in layoffs and reduction in services. We have worked to negotiate fair labor contracts. This budget cuts overtime back in all departments. This will force Department Heads to either be more creative with their delivery of services or simply be forced to curtail some services. Our blue-collar labor force will be bolstered by the transfer of remaining Water Department employees into various General Fund Departments, which will occur in the fall of 2004. Our Public Works, Parks, and Recreation Departments have gone understaffed for the past several years in anticipation of this transfer. Nonetheless total salaries in the General Fund budget exceed $7 million. Add an additional $4.2 million in projected benefit related costs and understand that personnel drives more than 70% of total general fund expenditures. Police and Fire comprise $3.6 million of total salaries. As always, in all departments, we must continue to look for ways to become leaner.

The City of Tonawanda will be forced to make difficult choices in the future more often than it already has in the past. Similar to 2004, capital expenditures and equipment purchases, compared to prior years, are scarce in the 2005 proposal. The department heads should be commended for working with the Mayor in putting their departmental requests together. The hard reality is that that our expenditures, especially the cost of hospitalization insurance, estimated in 2005 at $2.2 million, has grown and will continue to grow faster than the income we receive and use to reduce property taxes. Sales Tax and State Aid remain relatively flat at $3.7 and $2.1 million respectively. General Fund Debt Service for 2005 is approximately $1.3 million. Our taxable base remains relatively constant at $404 million.

Again the 2005 General Fund Budget squarely places the responsibility of the State of New York to continue to provide the City of Tonawanda with $500,000 in Supplemental State Aid. The timing of our budget calendar in relation the State fiscal year make it difficult to count on this money for 2005, especially when the State has yet to even adopt its budget for 2004. Again we are left with no choice. If the State fails to provide the City of Tonawanda with the $500,000 in Supplemental Aid that it has provided it would be to the significant financial detriment of the City.

Finally this budget appropriates $750,000 of fund balance to reduce the property tax levy by more than 5%. Using this much fund balance now to reduce the property tax levy means there will be less, if any, available to appropriate against future budgets.

The proposed Water Fund Budget is a reflection of the City’s complete elimination of its Water Department. The only revenue item reflected in 2005 are funds received from the surcharge, proposed to be 49 cents per thousand gallons, which will be placed on Erie County Water Authority Bills to City of Tonawanda water customers. This will be applied directly to outstanding indebtedness owed on bonded Water projects.

The proposed Sewer Fund Budget, approximately $1.5 million, requires an 8% increase in the Sewer rate from $2.98 to $3.22 per thousand gallons. For the minimum ratepayer this equates to approximately $1.68 per quarter or $6.72 per year. As of year-end 2003 the Sewer Fund Balance dropped to approximately $78,000 and the need is apparent to more adequately balance fund expenditures with operating revenues. This rate has not increased since June of 1996.