NORWICH – City officials couldn’t debunk rumors of a possible double digit tax increase during a public hearing that was called to order on Wednesday.
Officials met at Council Chambers on Tuesday night to hear public concerns regarding the proposed override of the state imposed .73 percent tax cap for the 2016 fiscal year. Given the present financial condition of the city, the proposed cap is an “unrealistic” expectation, according to City Chamberlain John Zielinski; but after several years of deficit spending and using money from its surplus to ease the tax burden, the surplus account has dried up and the city is now between a rock and a hard place heading into the 2016 fiscal year.
“We’re at a crossroads, and the Council knows this. It’s either raise taxes to pay for services, or cut the services.” said Zielinski. “There is no surplus to reduce tax increases.”
Norwich’s practice of deficit spending has led to a drastic decline of its surplus balance over the last five years. At the end of the 2009, the city had a fund balance of approximately $1.6 million. Projected through the end of 2015, the finance office estimates that balance to be reduced to $137,000.
“Essentially nothing,” said Zielinski. “Why did that happen? Deficit budgets were passed to keep budgets low, and they did that by spending their savings ... Unfortunately now, there is no more option of a balanced budget. A balanced budget hasn’t even become accessible because we don’t have any surplus to bridge the gaps.”
Last year, the Common Council adopted a budget with a $372,000 deficit, thus evading an 18 percent tax increase for 2015. Unfortunately, that maneuver’s no longer an option.
“There is no surplus to reduce tax increases,” Zielinski said.
Adding to the pressure, Norwich faces a number of mandated expenses. Approximately 75 percent of the annual budget is earmarked for benefits for active and retired employees. The expense of employee retirement alone will cost taxpayers an estimated $223,000 in 2016. Retiree health insurance, after contributions made by retirees, will cost $422,000. The city will also have to pay $80,300 in taxes imposed by the Affordable Care Act; and another $261,000 to front the projected 14.1 percent health insurance increase from Excellus Blue Cross (despite the fact the city has paid $2.8 million more than Excellus has paid out of claims).
But raising money to pay those expenses doesn’t come easy. Raising taxes 1 percent generates just $30,600, based on the average Norwich home value of $55,000. Raising taxes one percent equates to an $11.84 per year increase for the average taxpayer.
All things considered, the city has some tough, and maybe unpopular decisions to make, said former Ward Six Alderman and current City Supervisor Robert Jeffrey.
“We’re here now in a crisis, and I think it’s because we overestimated revenues and underestimated future expenses ... the Common Council needs to start looking at reducing costs immediately, and that includes consolidation of administration costs.”
Jeffrey said that while the city has little say over existing contracted pension deals, it can look at ways to restructure expenses in different departments, including emergency service departments. He additionally laid out concerns of raising taxes, especially for the city’s senior population. Seniors are already struggling with escalating medical costs; and without a scheduled increase in Social Security for 2016, higher property taxes could be the straw that breaks the camel’s back, he said.
There are also concerns that higher taxes will scare off businesses and potential homebuyers who might instead locate to surrounding townships where the same services are provided with less of a tax burden.
“We’re competing with local towns, in commerce and in residential,” Jeffrey said. “We can’t continue doing this … The population outlook for all of Chenango County is decreasing, and it’s the same here in the City of Norwich. The less taxpayers, the less people to tax, and that raises the tax cost.”
“Citizens need to know the City of Norwich is not in the same financial condition we used to be in, and that we probably can’t expect the same level of services that we used to have,” said Ward Five Alderman-elect David Zieno. “We need to have input from citizens to determine what kind of services we can expect less of, and maybe do without. I encourage (the Common Council) to look everywhere to see where the budget can be cut.”
As the Council continues its 2016 budgeting process, Mayor-elect Christine Carnrike said there needs to be more transparency to make taxpayers aware of the crisis, be it through local media, social media, or even by holding more town hall-style meetings.
“I think we need to take the time to make people aware of where we are and how we got here,” said Carnrike, adding that the public needs to know what services are being provided and what it will cost them to keep. “With a majority of citizens being on a fixed income, they need to be prepared ... We need to be transparent so that we can keep the public more informed in this whole budgeting process.”
City officials have already taken some steps to better control spending. In September, Norwich’s habit of deficit spending flagged it as being “susceptible to fiscal stress” by the NY State Comptroller’s fiscal stress monitoring system. The designation resulted in a spending freeze, hiring freeze, and no overtime for city employees unless approved in advance by the Mayor or designee. Considering the financial situation, the Norwich Police Department is not requesting refill of a position left vacant by an officer who left the department this week.
The Common Council will meet again at 7 p.m. Monday for a budget workshop. A resolution to override the .73 percent tax cap will be voted on by Council members at the next Common Council meeting on Tuesday, Nov. 17.