Yesterday, March 24, the New York State Comptroller’s Office (OSC) issued their audit of the City of Newburgh’s 2010 budget. The audit is available to download from the OSC’s website.

In response, today the city issued the following press release:

Acting City Manager Richard F. Herbek Responds

To State Comptroller’s Press Release on City’s 2010 Audit

In response to a press release on the City’s 2010 audit issued by State Comptroller Thomas DiNapoli on March 24, Acting City Manager Richard F. Herbek commented, “It is important to note that the City of Newburgh requested this audit in order to get as clear a picture as possible of the City’s financial status. I requested the audit on behalf of the City Council in the fall at a meeting with Mr. DiNapoli’s office that Senator William Larkin and Assemblyman Frank Skartados helped to arrange. I very much appreciate their assistance in setting this process in motion, as well as the assistance of Mr. DiNapoli’s office.”

In the last several months, Mr. Herbek’s efforts have been focused on gaining clarity on the many financial challenges facing the City, and obtaining expert assistance to address them, in the absence of a Comptroller.  Council approved hiring financial consultants Michael Genito and Dwight Hadley to help review the City’s finances, and recently extended Mr. Hadley’s contract so he can continue to assist new Comptroller Christine Mitchell.

Some of the budget issues that came to light were overestimated revenues, including payment in lieu of taxes, appropriation of an unsubstantiated fund balance for expenditures, and underestimated debt service payments.

The current financial crisis is “the City’s number one priority,” he said. “We know that 2010 and 2011 will continue to present cash flow issues, and along with Council, the City Comptroller, and Mr. Hadley, we will continue to carefully review expenditures and revenues.” The City’s outside auditors have completed the 2008 audit, and will soon begin working on the 2009 audit, which should give a clearer picture of the City’s finances, he said.

He added, “The City will begin work on the 2011 budget shortly, and is also taking steps to institute deficit financing. We will be working constantly to achieve a structurally balanced 2011 budget.”

Video excerpts from the city council work session Thursday, March 4, 2010.

The work session began with a grave report on the city’s financial status, given by Dwight Hadley, CPA, and assisted by Christine Mitchell, CPA, the city’s new comptroller:

Next came a presentation by Dr. Jerome Blue on the status of the Liberty Street School project:

The third presentation was regarding the Community Resource Officers, or CROs. Representing the Newburgh Enlarged City School District were Ralph Pizzo and Mike Pacella. The school district has offered to pay the city for two new police officers in exchange for staffing Newburgh Free Academy and North Junior High School with a CRO each. Also assisting with the discussion were two former CROs, who spoke of the benefits of the positions, and FBI agent Maryann Goldman, who spoke about the seriousness of Newburgh’s gang problems (as reported in the cover story of the Times Herald-Record) and urged the council to fund the positions.

Full video of the entire CROs discussion here:

Finally, from later in the work session, discussion on the Home Improvement Loan Program.

[video deleted]

This program is administered by Demetrius Faulk. Courtney Kain, Acting Director of the Planning Department, explained the program with Demetrius. It was during discussion of this program that (at 6:15 on the video) Councilwoman Marge Bell notes that the records show her as the recipient of a $13,500 loan. Bell says she did receive some funding, but she says she did not receive $13,500.

The loan originator is listed as the Newburgh Community Development Agency (NCDA), which corporation counsel Bernis Nelson recommended dissolving earlier in the work session.

(Res. 172-2009) Route 9W Reconstruction:

• BAN and RAN – Ken Bond, Esq., Squire Sanders and Dempsey

There was no hint that this agenda item actually included three resolutions, two involving bonds and the third involving the creation of an advisory board, and that Interim City Manager Richard Herbek had hoped to pass all three at the regular city council meeting to be held Monday, November 9th – sans public hearing.  The discussion on these resolutions stretched to over an hour.

Quotable Quotes

All you can do is apologize. – Corporation Counsel Michelle Kelson, on how Newburgh got into its financial mess.

I have seen absolutely no will to start living within our means… All I see is just more of the same, we credit card our way out. – Councilwoman Christine Bello, on passing more bonds to reduce the tax increase from 82% to 35%.

Have you discussed furloughs? – Councilman elect Curlie Dillard, who sat at the council table during the entire work session.

There is no way I can go to my constituents and say, “we need another 35%.” – Councilwoman Marge Bell.

If you had a control board [by the state taking over], I don’t think it’s a measurably better story for you folks. – Jeffrey Hyman, Stone and Youngberg (Newburgh’s bond underwriter.)

I sat with him [Ken Bond] on the control board [Mr. Valentine means Newburgh's financial advisory board] in the 90s. – Mayor Nick Valentine.

Listen to the full discussion (approx. 1 hour 10 minutes) here:

Download this file here.

Looking Forward

“This is going to be very very difficult without a public hearing,” Mayor Valentine acquiesced, and it was decided to have a public hearing at the council meeting on November 16th, and at that same meeting a vote would be taken.

On Monday, November 9th, expect to see during the regular city council meeting a resolution scheduling the public hearing.

Q and A with William P. Reynolds from the Office of State Comptroller Thomas P. DiNapoli

NA: On August 18, 2009, Anthony J. Dolan, CPA sent a letter to Charles Emberger, then City of Newburgh Comptroller, which states that “your annual financial report for the fiscal year ended December 31, 2008 remains delinquent.”

1. Has the City of Newburgh complied with Mr. Dolan’s request and filed its 2008 annual financial report?
WR: Our records indicate that the City filed its 2008 annual report on 10/1/09.

I also have some questions regarding the “Constitutional Tax Limit Instructions for Cities” PDF from your website.

2. Am I to understand that if the information regarding constitutional tax limit and how it is calculated is included in the annual budget no separate form with the state need be filed?
A separate tax limit form is required to be filed. The tax limit form for the 2009 fiscal year was filed on 2/19/09 [for Newburgh.]

3. To that end, is the last time the constitutional limit was calculated for Newburgh when the 2009 city budget was approved and filed with the state–or is there any more recent state filing of Newburgh’s constitutional tax limit?
The constitutional tax limit was last calculated for the 2009 budget. The 2010 form is due at least 10 days prior to budget adoption.

4. I noticed on page two of the PDF document referenced above states that “At the same time, if property values decline overall, the tax limit will decline as well.”  How is this calculated, and, for example, would the recent bottoming out of the real estate market reflect a change in the tax limit?
The tax limit is calculated by taking 2% of the five-year average full valuation as noted on page 3 of the PDF document (http://www.osc.state.ny.us/localgov/finreporting/cities.pdf). Each year’s full valuation is calculated by dividing the annual assessment roll by an equalization rate set by the Office of Real Property Services. If the five year average declines as a result of decreased property values, then the tax limit will also decline.  However, because the tax limit is based upon a five-year average, changes will occur incrementally.

–Councilwoman Christine Bello

During the budget hearings it was mentioned, but it was not part of an official meeting.

–Mayor Nick Valentine

I’m just speechless, I could not even believe it…. Nothing unethical took place.

–Councilwoman Marge Bell

The council knew what we had discussed, there was confusion among staff.

–Christine Bello

Mayor claims violation of Open Meetings Law

At the November 24, 2008 City Council Meeting, Mayor Nick Valentine criticized Councilwomen Bell, Bello, and Dickinson for allegedly violating the Open Meetings Law. After Councilwoman Bello made a motion to change the Housing and Real Estate Development Coordinator position from full-time to part-time as an amendment to the 2009 budget, Valentine made his remarks:

We did discuss a variety of things over a couple of our meetings… On Thursday night, this did not make the checklist. What happened next, it did disturb me a little bit. The following day there was a series of conversation and emails by three of our council members. And in those discussions, consensus was that they did not want a full-time position, they wanted a part-time position. Three votes. Except that, that’s not how we do it, we do it through what we call the Open Meetings Rule, which is, you don’t decide, three people on what the votes going to be… We went over that today, we solved it by saying, we discuss it like we’re discussing it tonight, it can be amended as part of this budget… In a funny way, I feel bad nobody called me. I would have answered, and I would have talked about it and given my opinion.

Councilwoman Bello attempted to respond, saying, “Can I…”

Valentine: “No, that’s it…”

Bello: “But what you just said was not true.”

Valentine: “Those are my comments. Those are my comments on the amended part of the budget.”

Council did discuss the position at the 11/20/08 work session; consensus was position was “half-time”

Reviewing the videotape of the work session, the council did indeed discuss the full-time/part-time Housing position, during the CDBG 2009 budget discussion portion of the meeting.

Councilwoman Bell: Another question that I had was on the business development, $50,000. I thought we were not going to do that position.

Lourdes Zapata-Perez: That’s an existing position. That’s to fund the business specialist that we currently have on staff. So that pays for 70% of that staff person’s time. The remaining 30% is incorporated with the Newburgh 20/20 line.

Councilwoman Bell: Okay. And $35,000 for the property disposition?

Lourdes Zapata-Perez: That’s the housing… real estate personnel that we’ve talked about during the budget process. The council had agreed to fund it out of the CDBG program 09 budget on a half-time basis. My proposal to council at the budget meeting, because, again, I feel very strongly that it is a full-time position, due… given all the housing related and real estate related activities that are going on in the city, it really calls for a full-time position. With the memo I gave council at the budget meeting with my department, as part of that, there’s money in the 2008 CDBG position that is available. So my request to council is to approve it as a full-time position using half of 09 and half of 08.

Councilwoman Bell: And I guess where we left off with it was that, council said, asked for it to be part-time or to be at a consultant basis.

City Manager McGrane: But the CDBG budget, it is part-time, correct?

Lourdes Zapata-Perez: …(indicates it is)

City Manager McGrane: Right. So, approving this, is approving a half-time position. Approving the position in the budget is, actually, approving the full-time position that’s funded by CDBG, but if we just focus on this, this is the money for the half-time position. Whether or not it’s a half-time or a consultant, I think, it’s just allocating the money for this task in the 2009 CDBG budget. And you, the council had agreed to do that in your discussions on CDBG.

Council also discussed the position at the 11/13/08 work session

During this session, Councilwoman Bello recommends eliminating the position, Councilwoman Bell recommends the hiring of a consultant, and after City Manager McGrane defends making the position full-time Councilwoman Bello expresses frustration that the city manager defends positions the council would like to cut. (Primary discussion of this begins at 15:00.)

Would work session minutes have prevented the confusion?
According to an email from Councilwoman Bello,

The problem occurred when we were informed that even though we were asking for a part time person, Lourdes was stating that there were funds in the 2008 budget left over that they would combine to the 2009 amount and make it full time anyway. This was clearly contrary to what the majority of council had designated and that is exactly why Marge and I sent emails reaffirming our previously discussed position. I believe that Mary Ann made a phone call to reaffirm.
I do not recall at which budget meeting it was discussed but I know it was previously discussed.

While I may not be able to pin point the exact budget meeting in which we had the discussion on the Business Coordinator, the fact remains that if we had minutes, (as required by Open Meetings Law) our statements would be part of the public record, and this whole problem could have been avoided.

What is the issue?

The Times-Herald Record ran an article on the controversy, “Newburgh councilwomen suspect dirty tricks.” And today they ran an editorial “Jeers” to the “leaders in the City of Newburgh” regarding this, stating:

The issue, now as it was with other confrontations, goes far beyond the status of a single job or the cost to taxpayers. It comes down to the inability or unwillingness of all parties to talk openly about their disagreements and follow the rules of conduct that could lead to an agreement.

On reflection of the history of the meetings and their documentation, this does not seem to be the issue at all. Rather, it seems from the 11/20/08 meeting that the City Manager represented to the council that their wishes of the position being part-time were being honored by “approving a half-time position.”

According to the Open Meetings Law, it is not illegal for councilmembers to confer with one another, even by email. What would be “inconsistent” with the law would be making a collective decision over email. That is not what happened here.

Part 1 of 5

Discussion with Police Chief Eric Paolilli on the 2009 Budget.

Part 2 of 5

Discussion of the 2009 Budget with Lourdes Zapata-Perez, Community Development Director.

Part 3 of 5

Discussion of the 2009 Budget.

Part 4 of 5

Discussion of the 2009 Budget with the city’s assessor Steve Ruelke.

Part 5 of 5

Discussion of the 2009 Budget.

There will be one additional budget work session tomorrow, Monday, at City Hall at 6 p.m.

Part 1 of 4

The Council discusses the 2009 Budget with Department of Public Works Director George Garrison.

Part 2 of 4

The Council discusses the 2009 Budget with Planning Department Director Bob McKenna and Community Development Director Lourdes Zapata-Perez.

Part 3 of 4

The Council discusses the 2009 Budget with the assessor, Steve Ruelke.

Part 4 of 4

General discussion of the 2009 Budget.

Part 2 of 9

Public Hearings:
4. 2009 Budget

Part 3 of 9

Presentation – citation from Governor Patterson for the African American Day Parade

Part 4 of 9

Comments from the public regarding the agenda.

Part 5 of 9

Comments from the Council regarding the agenda.

Part 6 of 9

City Manager’s Report.
5. Resolution No. 175-2008
A resolution approving the City of Newburgh’s Consolidated Housing and Community Development Strategy and Action Plan for fiscal year 2009.
6. Resolution No. 176-2008
A resolution authorizing the sale and proposed redevelopment of real property known as 107 Renwick Street (Section 45, Block 6, Lot 6) to Manual and Dolores Lopez with a purchase price of $47,500.00.
7. Resolution No. 177-2008
A resolution to appoint commissioners of deeds for January 1, 2009 through December 31, 2010.
8. Resolution No. 178-2008
A resolution authorizing the City Manager to enter into an agreement on behalf of the City of Newburgh with the Newburgh Housing Authority to resolve outstanding litigation.
9. Resolution No. 179-2008
A resolution amending Resolution No. 163-2007 which provides a benefit plan for non-bargaining unit employees of the City of Newburgh.

Part 7 of 9

Old Business:
10. Resolution No. 143-2008
YMCA
11. Resolution No. 161-2008
A resolution appointing Thomas Barry to the Municipal Civil Service Commission of the City of Newburgh.

Part 8 of 9

General Comments from the Public.

Part 9 of 9

General Comments from the Council.