The Albany city government could lose important state funding under New York Gov. Andrew Cuomo's proposed fiscal 2018 budget, according to S&P Global Ratings.
S&P analyst Rahul Jain wrote in a report Thursday that Cuomo's final version of his $162 billion executive budget proposal, submitted Feb. 17, leaves out $12.5 million in "Capital City" funds that were included in Albany's adopted 2017 budget to help it balance operations. The "Capital City" funds are considered payments-in-lieu-of-taxes for tax-exempt state-owned properties and amounted to 7.1% of the city's budgeted general fund revenues for the current fiscal year.
In anticipation of the potential funding loss, Albany officials recently announced a hiring freeze and a moratorium on purchases.
"While the spending freeze may provide some savings for the city, we believe it will be unlikely to make up the entirety of funds lost should the state budget not include--or even partially include--funding in its adopted form as revenue for the state capital," said Jain in his report.
Albany is rated A-plus with a negative outlook by S&P. Jain noted that the state has recently had an "irregular pattern" of providing PILOT revenues to New York's capital city starting with a reduction from $22.85 million in 2011 to $15 million the following year. The uncertainty with PILOT payments required "significant drawdowns" of the city's fund balance with 2015 reserves dropping to $1.7 million, or roughly 1% of operating expenditures, according to Jain.
"This is not the final adopted budget and that state lawmakers may include the $12.5 million in "Capital City" funds for Albany in the finalized adopted budget, set to be passed prior to April 1," said Jain. "However, should these funds not materialize, or should they be less than the city anticipates, we believe the city will experience weak operating performance in fiscal 2017 if it cannot balance operations through additional cuts or revenue increases."
