New York’s comptroller is proposing a monitoring system that would rate the financial status of the state’s local governments.

The monitoring system, announced on Monday by Thomas DiNapoli, would identify municipalities and school districts experiencing signs of budgetary strain so that preemptive corrective actions could be taken.

The new proposal comes after DiNapoli released a report last month on fiscal challenges facing local governments and said he would look into possible solutions.

On Monday he released a more in-depth report based on decades of financial data that show that many of New York’s cities are having trouble balancing budgets and recovering from deteriorating local economies.

“Cities are struggling to keep their heads above water,” DiNapoli said. “The fiscal challenges they face have evolved over many years and are systemic.”

Monday’s report found that since 1980, city expenditures have jumped $2.7 billion, while locally raised revenues increased by only $2.1 billion.

In particular, property tax increases have outpaced housing values and income levels. Property taxes have historically been a primary source of revenues.

“Over time as expenditures increase, cities have turned to the sales tax to augment the property tax, and as sales tax revenues have flattened or declined, cities have turned to other charges and state aid to finance their budgets,” the report said.

The report also found that for the 61 cities examined — which exclude New York City — overall population has decreased by 15% since 1980 and many cities have suffered sizeable job loses. By 2010, the state unemployment rate of 8.5% was exceeded in a number of cities around the state and poverty rates have outpaced statewide and national averages, the report found.

The comptroller said that the situation may only get worse.

“That’s why my office is proposing an early warning system that will identify those headed down the path to fiscal crisis sooner and give local officials and the public sufficient time to discuss options for turning things around,” DiNapoli said.

The comptroller’s office will use data already submitted by more than 4,000 local governments and calculate and publicize an overall score of fiscal stress across the state. The system will not impose any additional reporting requirements on local governments.

The scores will classify whether the municipality is in “significant fiscal stress,” “moderate fiscal stress,” or “nearing fiscal stress.”

The monitoring system will use nine financial indicators, within five categories: year-end fund balance, operating deficits, cash position, use of short-term debt, and fixed costs. It will also use 14 environmental indicators, including population, age, poverty, and property values.

The system is based on a process that auditors have been using to detect financial problems in communities.

An in-depth analysis of each indicator is included in the report.

Peter Baynes, executive director of the New York Conference of Mayors, said that while the monitoring system may raise awareness of an impending crisis, it does nothing to proactively assist local governments in avoiding or reducing fiscal stress.

“Rather than helping municipalities measure a fiscal problem of which local officials are already well aware, the state should be identifying solutions and taking the steps necessary to alleviate the financial pressures confronting cities and villages,” Baynes said.

He added that the proposal fails to recognize that many of the key factors causing fiscal stress for local governments are beyond the control of local officials.

“The state has been a partner in creating the fiscal stress crashing down on municipalities,” he said. “Now is the time for the state to be a part of the solution to this growing fiscal crisis.”

DiNapoli plans to distribute the proposed monitoring system to officials in the state for review during a 60-day comment period, which will be announced sometime soon.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.