To:

Honorable James Noble President Common Council Council Members Mayor Shayne R. Gallo

From:

Attached please find the proposed 2013 budget for the City of Kingston. The discussion that follows shall highlight the major aspects of the 2013 proposed budget and recommendations for the City of Kingston prospective budgets. 2013 CITY OF KINGSTON BUDGET City Tax Levy The 2013 City tax levy, exclusive of Safety Net, is $15,037,128 and is unchanged from 2012. Homestead properties, on average, will pay 0.33% less in City of Kingston taxes (exclusive of Safety Net) in 2013. For example, a $150,000 homestead property on average will pay $3.63 less in City taxes in 2013. Nonhomestead properties, on average, will pay 0.38% more in City of Kingston taxes (exclusive of Safety Net) in 2013. For example, a $250,000 nonhomestead property will pay $13.59 more in City of Kingston taxes in 2013.

OVERALL EXPENDITURES A one point increase equals $150,000. Therefore, the tax cap of two-percent would only be able to sustain a $300,000 increase in spending. The 2013 budgeted expenditures of $36,819,581 are $194,084 or 0.5% higher than the 2012 adopted budget. 2013 weekly spending at $700,000+ per week Health costs for active personnel and retirees are at 19% of 2013 budget. Funded pension costs for personnel are at 9% of 2013 budget. In addition, unfunded pension costs are at 3% of 2013 budget due to the fact that the City is borrowing for pension costs at an increasing rate of over 1 million dollars for 2013. Overall personnel costs are currently 76% of 2013 budget. OVERALL REVENUES The 2013 budgeted revenues of $21,096,060 are $492,878 or 2.4% higher than the 2012 adopted budget.

SPECIFIC EXPENDITURE AREAS Pension costs for 2013Budgeted NYS Retirement System current non-deferrable costs are projected to increase 6.3% from $3,183,932 in 2012 to $3,385,352 in 2013. In 2013, the City expects to amortize approximately $1.15 million in pension cost increases (Total 2013 pension bill projected to be approximately $4.5 million). Health Insurance costs for 2013Budgeted Health Insurance costs are projected to increase 8.3% from a projected 2012 actual of $6,567,888 to $7,112,518 in 2013. Medicare Part B (total includes former lab retirees) is $295,000 for 2013 Budget. Former City of Kingston Lab retirees health insurance costs $360,974 Safety Net expenses for 2013 are projected to climb from $1,189,008 in 2012 to an estimated $1,753,841 for 2013. The increase utilizes the Citys entire allowable tax cap increase. Safety Net levy on City tax bills are projected to increase from $0.75 per thousand to $1.15 per thousand.

The County Executives Safety Net Proposal will gradually eliminate this separate line item on City property owners tax bills over the 2014-2017 tax years. The County of Ulster to assume 100% of Safety Net by 2017. There shall be no effect on City Budget in 2013; in 2014 there will be 10 months of a 33.33% reduction; in 2015 there shall be two (2) months at a 33.33% reduction and 10 months at a 66.67% reduction and in 2016 there will be two (2) months at a 66.67% reduction and 10 months at a 100% reduction in tax levy for the City of Kingston. Solid WasteTipping Fees for 2013 $85 per ton; Sludge Disposal fees for 2013 are $95 per ton. Should the County implement flow control by adopting a multi-tier fee schedule, the Citys proposed tipping fees shall be at a fixed rate and sludge disposal at a fixed rate per ton. Proposed tipping fees shall be at $85/ton; sludge disposal at $95/ton. In addition, until the contract with UCRRA expires, the City shall continue to compensate the UCRRA for recycling. However, on 3.1.13 the City may elect to sell recycling collected from single stream refuse collection and use the proceeds to offset UCRRA tipping fees for solid waste.

In 2012 budget and pursuant to an agreement with UCRRA, expiration date 2.28.13, the City compensates the UCRRA at $ 20 per ton. PROPOSED SAVINGS FOR 2013 Fire Department abolishing vacant mechanic position savings of 85,000; Tourism consolidation with County of Ulster savings $20,000; City Lab Health Plan. Audit shall be ongoing. Potential savings can not be specified until audit is complete. Therefore, at this time cannot project savings. The allocation for 2013 is $360,974. The results of the audit shall determine eligibility for all health benefits that have been provided to former City Lab employees and retirees since 1993.

NEW APPROACH TO MANAGING CITY FINANCES AND GENERATING REVENUE

In preparation of the 2013 budget my administration has implemented a transparent, accountable and modified zero-based budget process for all City Departments. As part of the 2013 Budget process, the City Comptroller and I have reviewed each budget line item and required each department head to justify all proposed spending. The City has effectuated savings from limiting cell phone use and discontinuing take home cars. Spending has been curtailed for office supplies and each departments Capital Budget for equipment has been significantly reduced to lessen the Citys debt service accordingly. Further, the City Comptroller is currently in the process of refinancing the 2003 bonds obtained for City Hall restoration and other capital improvements.

The City has implemented a new time and attendanceovertime compensatory time procedure which shall provide more transparency and centralized oversight resulting in potential savings and reducing the likelihood of abuse and fraud. In addition, where feasible, consultant and professional services have been curtailed. For example, City Corporation Counsel has assumed a number of employment, labor grievances and disciplinary hearings reducing costs commensurate with personnel matters. In 2013, every employment vacancy shall be reviewed and evaluated as to its necessity. Going forward with contract negotiations with the Citys three (3) unions, it is imperative that all forms of compensation and benefits must be addressed including but not limited to health insurance, pension step longevity and payout for earned accruals.

In addition, departmental operational and administrative issues, including but not limited to work schedule, manning clauses, replacement clause and overtime procedures for filling shifts must be considered in prospective contract negotiations. In 2013 the City must continue to work with the County of Ulster and neighboring towns to consolidate services and thereby leverage City tax dollars. To comply with the 2% property tax cap, the City must receive mandate relief from the State Legislature. The two (2) most expensive unfunded mandates included in the 2% tax cap are health and pension costs. While the State of New York has implemented new tiers for the Retirement System, the financial relief is long-term and does not currently address spiraling health and pension costs.

It is imperative the City seek credible economic development to expand its commercial tax base. During my first year in office I was successful in negotiating with two (2) reputable and profitable local manufacturersStavo and Wolf-Tec to occupy the former Colony Liquor site. This shall provide between 100-150 good paying manufacturing jobs with benefits and add to the Citys commercial tax base and generate sales tax revenue. Further, the City has engaged in an aggressive tourist campaign through its consolidation with Ulster County Tourism resulting in Kingston becoming a destination for visitors throughout the Hudson Valley and metropolitan New York area. Therefore, we must not only market our City for manufacturing and other related employment but also continue our focus on marketing our Citys historical, architecture and environmental attractions to generate sales tax revenue. We must also pursue Kingston Hospital campus development in a manner that offers quality health care and employment and increases our commercial tax base.

It is imperative the City focus on revitalization of the Broadway Mid-town businesses, arts and digital corridor by assisting with infrastructure, CD funds, KLDC loans and any grant money that may become available. This is necessary to ensure the continued success of Ulster Performing Arts Center (UPAC), 721 Media Center and businesses throughout Mid-town.

CAPITAL PLAN 2013 BUDGET There is $392,500 earmarked for Capital improvement expenses in five (5) departments: Police Department Electronic Equipment ($25,000); Recreation Department Mower and Snowblower ($20,000); Information Technology Computer and Server Upgrades ($164,000); Comptroller Tax System Upgrade ($30,000); Fire Department In-charge officer vehicle ($33,000) Safety Equipment ($120,500) (Total $153,500)