LOCKPORT – Gov. Andrew M. Cuomo signed an emergency financing bill Thursday, enabling the City of Lockport to borrow up to $5.35 million on a 10-year bond to be used to pay off accumulated deficits.
City Treasurer Michael E. White said the exact figure probably will be between $4.6 million and $5 million, but the final number is to be determined by officials of the State Comptroller’s Office, which recommended the borrowing in the first place.
“This is a critical step for the City of Lockport to address previous years’ deficits,” said Mayor Anne E. McCaffrey, who received word of the signing from State Sen. George D. Maziarz.
Maziarz, R-Newfane, and Assemblywoman Jane Corwin, R-Clarence, pushed the bill through the State Legislature in the waning hours of the Albany session in June.
Corporation Counsel John J. Ottaviano said, “The Treasurer’s Office will proceed as if it were a regular borrowing.” He said the Common Council will have to vote on a formal bond resolution, likely at its next scheduled meeting Sept. 17.
In late August, Moody’s Investors Service cut the city’s debt rating to one step above junk-bond status and warned that further reductions might be coming. Thus, the interest rate on the bond is unknown.
“It’ll go up a little bit, but still, rates are reasonable,” White said.
The state’s last audit of the city’s cash flow, released last month, projected that the city would run out of money to pay its bills this month unless the borrowing were approved.
But as a condition of the deficit financing, all of the city’s budgets will have to be approved by the Comptroller’s Office in advance of their passage for as long as the bonds are outstanding, which means 10 years.
If the Comptroller’s Office decides changes are necessary in a proposed budget, the city will be required to make those changes. That was an alteration demanded by the Governor’s Office; the original bill would have allowed Lockport to reject budget amendments suggested by the Comptroller’s Office.
State audits said the city’s finances were crippled when the Common Council adopted a 2013 budget based on financial statements that a state audit later determined were wrong. White’s figures told the Council that the city had a small surplus as of the end of 2012, but actually it was $1.15 million in the hole at that point, the Comptroller’s Office determined.
The city borrowed $2.7 million on a short-term note in October of last year to obtain enough money to get through 2013. The new borrowing will be used in part to pay that off, White said.
White has blamed former Mayor Michael W. Tucker for not supplying him with enough staff to replace workers on long-term sick leave. A report the city commissioned in March from Bonadio & Co., a local accounting firm, said the city’s key accounting position was vacant for two years.
“This is one of the primary causes for the beginning of the city’s struggles in the treasurer’s department,” the Bonadio report said. During the vacancy, the city’s bank reconciliations were not done on time and general management of ledgers and accounts was not occurring.
At the same time, the office was handed additional duties, including the city’s new semiannual refuse billing, and a new software system was installed in 2012. That conversion took more than a year.
“Many people in the Treasurer’s Office knew there were issues with the numbers but just didn’t have time to fix them,” the Bonadio report said.
Buffalo News Albany Bureau Chief Tom Precious contributed to this report. email: firstname.lastname@example.org