$80 Million Lifeline

ALBANY?- Distressed municipalities, which make up a large number of cities, villages and towns outside of the New York City area, were a hot topic in a meeting held by Gov. Andrew Cuomo on Tuesday.

Cuomo detailed a proposal to create a Financial Restructuring Board, which would help distressed local governments manage their finances. The proposal includes an alternative binding arbitration process that municipalities and unions could voluntarily opt for to resolve contract issues in an expedited procedure.

“Growing retirement costs, declining populations, decreasing property values, and the recent fiscal crisis have all contributed to the difficult financial issues facing localities today,” said Cuomo.

“The Financial Restructuring Board will bring together state and local officials to help localities make tough decisions and solve this crisis now instead of kicking the can down the road.”

In Tuesday’s presentation, the governor detailed how more money is not the solution to help local governments solve their fiscal issues. The state’s existing Aid and Incentives for Municipalities program does not reflect local government need or performance, and already constitutes a large percentage of the budgets of New York’s largest cities

The Financial Restructuring Board would include the state budget director, secretary of state, attorney general, state comptroller, and one private sector restructuring professional. The budget director would establish standards to determine which local governments qualify as fiscally distressed. Fiscally distressed local governments would be able to request the assistance of the board, and work together to identify a specific restructuring plan.

“In my 14 years as mayor of the city of Jamestown, in the far reaches of Western New York, this is the first time I can say that there has been an overall recognition and attempt to understand the deep-seeded structural economic problems that cities in particular and local governments in general across the upstate region have been facing for multiple generations and an understanding that it’s going to take more than the same old same old approaches,” said Jamestown Mayor Sam Teresi. “I see this proposal today as another tool to go into the tool chest for local governments. I like the notion of it because it is voluntary and it presents itself as a viable alternative to a more invasive, control board-type of approach, which should always be done as a last resort by a local government and avoided at any possible cost.”

IMPLEMENTING RESTRUCTURING PLAN

The 2013-14 budget includes up to $80 million to assist local governments with reorganization plans. Recommendations of the board would be binding upon any municipality that accepts funding. The board may require development of multi-year financial plans, functional consolidation, mergers, shared services, fewer elected officials, and other measures.

The board would also serve as a binding arbitration panel, as well. The board would provide an alternative to the binding arbitration process for police, fire, or deputy sheriff unions if municipalities and unions agree. The board would render an arbitration ruling within nine months.

According to Teresi, the idea of state aid with regard to financial restructuring is a welcome sight. During his first year in office, Teresi approached the governor’s office and the state comptroller’s office about the potential of receiving a financial control board in Jamestown because the city government didn’t feel that it had the capacity to solve the problems without state help.

“At that time, our request was denied, but in retrospect it was probably best for our city because there are a lot of unintended consequences and damaging implications of having a control board,” said Teresi. “This is a viable alternative to control board approaches for cities, towns, villages, counties that are distressed.”

Teresi continued to praise the idea, saying that Jamestown may be one of the first municipalities in line to implement this program, should it be rolled out and offered across the state.

“The attraction of this program goes well beyond the notion of providing financial incentives to assist localities to implement new ways of doing things or to collaborate or to consolidate with neighboring communities,” said Teresi. “To me, one of the real benefits of this program is bringing the eyes, the ears, the intelligence of the state on board to work with us. A lot of our problems cut across municipal boundaries, but many of our problems are unique to our borders as the governor indicated. To sit down with us, to use their experience to legitimize the restructuring process that we need to go through. We need to change the paradigm, not just continue to fund a system that hasn’t been working for generations. It goes well beyond financial incentives, and gets down to the brass tacks of how we can restructure so that we maintain jobs and services in our communities.”