Sorry, Scare Tactics Won't Work: Geneva is No Batavia

We were surprised when the presentation from Geneva’s outside auditor, Laura Landers, turned into a discussion of tax policy. The message that emerged from a series of Council questions is that we ought to continue with tax increases to avoid the fate of taxpayers in Batavia, New York. Landers is from Batavia, and she explained that those poor souls were hit with a double digit tax increase. It sounded like Batavia was an otherwise well run municipality, and if only their council hadn’t insisted on holding the tax rate steady, they could have avoided this year’s massive increase.

This seemed an interesting scenario, and it seemed to dazzle some councilors, but we wanted to run a fact check. We’ve looked into the Batavia budget (and you can, too, in the No Strings document library). There is a lesson to be learned from Batavia, and it is this: City Councilors need to be informed about budget issues and can’t be afraid to question the City Manager about critical budget components. Some councilors might want to use Batavia as a scare tactic to push through another tax increase, but the facts take the wind out of their sails.

Let’s back up. At City Council’s regular meeting, September 5, we received an executive summary of the City’s 2006 finances from the independent auditor (Freed, Maxick and Battaglia). It was business as usual. The 40+ page audit was on our desks waiting for us, an 8 page executive summary attached. We were expected to peruse this while Landers made her presentation and then we could ask questions. Not a lot of time to digest the complex material. We insisted that she return at a later date, when we’d had time to review the documents in full, but some councilors were prepared to pepper her with questions about our tax policy. They wanted her to say that we’d better keep raising taxes, and she warned us about Batavia.

Actually, her findings were fairly positive. We budget fairly conservatively, which meant we had a surplus of $183,00 for 2006. We took in more than projected and spent what we planned. That surplus went back into the fund balance, the city’s savings account, which Landers said is much healthier than almost any other city she deals with. There are a few areas in need of improvement, but it seems that last year’s hiring of an additional employee in the Comptroller’s office will take care of those things.

The audit discussion eventually turned from administrative oversight of the budget to policy-making when Councilors questioned the auditor about the tax rate. Councilors Cosentino and Schroeder asked her to comment on the negative impacts of tax cuts. Some people, they claim, want us to cut taxes, but isn’t that a recipe for disaster? Couldn’t we end up like—a hush falls over the room—Batavia?

She described Batavia’s situation as a desire to keep taxes low at all costs, resulting in the city draining its fund balance, running a deficit last year and facing a double digit tax increase this year. Right on cue, Cosentino followed up with another question; “Was fair to say,’ he asked, “that ‘everything goes up’?” Translation: spending more and taxing more are just a fact of life and shouldn’t we just get used to it and vote an increase? She agreed that unless something is done differently, you can’t pay for rising costs without raising taxes.

No kidding! So you can increase taxes or you can do things differently, like increase revenue from sources other than property taxes!

Long ago we joined with former Councilor Nyrop in arguing that City of Geneva taxes are too high (see our posts on this issue from March and April) and they are having a negative impact on economic development in Geneva. The cost of business in New York State is bad enough. We shouldn’t make it worse by continuing with a tax rate that is at least 3 times higher than our Ontario County counterparts. Our assessment has increased, but it doesn’t represent a lot of new taxable properties, just higher values on existing properties. So residents will feel the pinch of a higher assessment if the tax rate stays the same, and will get a double whammy if the rate increases.

But some councilors want us to believe that taxes must go up because they see only three options:

1. Raise taxes.
2. Reduce taxes by cutting services.
3. Reduce taxes by following Batavia’s lead into deficit-spending.

We say the correct answer is “D. None of the Above.” And we’ll even use the case of Batavia to show you why:

Here’s what really happened in Batavia. Just look at their 2007-2008 budget message announcing the double digit tax increase. Their tax rate will rise to $9.54 per $1000 assessed value. That’s just about half of Geneva’s rate! We are currently at $18.26 per $1000). Batavia’s new city manager reviewed Batavia’s mistakes of the past years and gave four reasons for the mess they are in:

1. Overestimating revenues for several years.
2. A city guarantee of school and county taxes (the City pays the taxes upfront for the entire assessment roll and then bills and collects residents. The city then absorbs the cost for people who do not pay).
3. Increases in operating expenses, specifically employee benefit premiums (retirement and health care) as well as utility bills and debt service payments.
4. A potential retroactive raise for staff that was not budgeted for.

No where does he mention that the taxes are too low!!
A NYS Comptroller’s review of Batavia’s budget drew attention to another fact: their ambulance service is a cause of their budget trouble because it operates at a deficit.

Clearly, Geneva and Batavia are two very different communities. Our revenue estimates are always conservative, as reported in our most recent audit. In 2006, our actual revenues exceeded the budget projections by nearly $1 million. Although we provide billing services for the county, we do not guarantee the funds in the way Batavia does. We have seen cost increases in all of the areas Batavia has, but those are aggressively budgeted for, to ensure we meet all costs. And we don’t make a habit of retroactive raises. The city manager’s most recent raise is the exception, not the rule.

Add to that our recent increases in State Aid, sales tax, the savings from the library tax, and the new hotel occupancy tax. We are diversifying and increasing revenues at a rapid rate, something Batavia couldn’t do. So we aren’t fooled by Council’s desire to scare us into a tax increase with images of Batavia. And we hope you won’t be either.