O F F I C E O F T H E M A Y O R ________________________

Stephanie A. Miner, Mayor

203 CITY HALL • SYRACUSE, N.Y. 13202-1473 • (315) 448-8005 • FAX: (315) 448-8067

WEB PAGE: www.syrgov.net

April 8, 2015

Common Council Members

City Hall, Room 314

Syracuse, NY 13202

Honorable Members of the Common Council:

Pursuant to Article VI, Chapter 1, Section 6-102 of the City Charter, I hereby transmit to you the budget I have

approved for the City of Syracuse and the Syracuse City School District for the period of July 1, 2015 through

June 30, 2016.

Overview:

Each budget cycle offers the City administration a chance to review its programs and services along with the

associated revenues and expenditures. Faced with the difficulty in providing essential services with stagnant

revenues, departments were challenged to tighten operations and work within budgetary constraints. The use of

reserves continues despite these efforts. The City has used reserve funds to balance its budgets in the last four

out of five years and this is the third consecutive year.

The School District has increased the amount of reserve funds applied to this year’s budget in order to preserve

programs and the level of service required in our community. For 2015-2016, they are projecting the use of

reserves in the amount of $25 million. The City is projected to use $9.2 million of its reserves to balance its

budget. Total City reserves at the beginning of FY 2015 are $69 million. Reserves will decrease to $54 million

with the projected use of $15 million for 2014-2015. The addition of $9.2 million in this budget as presented

will bring it further down to $44.8 million. An infusion of new revenues through growth or an increase in state

aid is essential to stay fiscally sound and stem the use of these reserves in future budget cycles

The 2014-15 budget contains a total appropriation of $674,966,313. Of this amount, $283,763,059 (42%) funds

City operations and $391,203,254 (58%) is allocated to the Syracuse City School District. The City’s budget

will have a decrease of 1.7% or $5.1 million over the current fiscal year. The School District’s budget will

increase $15.9 million or 4.2% over the current fiscal year.

The City tax levy will increase $64,404 to $33,928,036 due to an increase in assessed valuations on City

property. The School District tax levy will increase $81,744 to $64,388,976 also due to an increase in assessed

valuation on taxable property assessed on the School District.

This budget does not include a property tax rate increase or an increase in fees charged for water and sewer

services.

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City Revenues:

Sales tax, State AIM aid and property taxes compromise 83% of total City revenues. Sales tax is the only area

of revenue growth. It is projected to increase $2.7 million to total $85.2 million for FY 2016. A 2.5% growth

factor together with the formula change in the increased percentage of the one percent portion under the sales

tax agreement with Onondaga County resulted in an overall 3.2% total growth rate.

FY 2016 represents the last formula change under the sales tax agreement. Future increases will be solely based

on sales tax growth factors.

State AIM aid will remain at its current level of $71.8 million. AIM aid has remained at the same funding level

for five consecutive years.

The City property tax levy will be $33.9 million.

Other highlights on the revenue side of this proposal include:

- $595,000 increase for new PILOT and shelter rent agreements for nonprofit properties. The City

negotiated four new shelter rent agreements in FY 2015.

- $472,000 increase in building permits to account for major construction projects such as the Hotel

Syracuse, Excellus, Sibley’s, and Syracuse Savings Bank buildings, new apartment construction on

Remington Avenue and the continuation of the Inner Harbor build out.

- $5.2 million for payment of prior year’s taxes and associated fees and penalties for increased efforts to

collect from delinquent property owners under threat of foreclosure and transfer to the Greater Syracuse

Property Development Corporation.

- $155,000 increase in annual alarm fees due to implementation of Ordinance #250-2014

- $465,000 increase in revenue for City owned parking garages and parking meters. New revenue control

- equipment, implementation of Whoosh!, the downloadable mobile app to pay for parking meters as well as

an increase in downtown residential living and entertainment have increased the demand for parking.

- $400,000 decrease in NYS highway aid for street structures and pavement improvements. This

reimbursable revenue account is based on previous years completed projects.

- $898,000 decrease in the estimate of 2015-2016 Uncollected City and School Taxes. As tax delinquent

properties have been foreclosed and transferred to the Land Bank their status changes to a tax exempt

property. Taxes are not levied on tax exempt properties therefore the amount of budgeted uncollectible

taxes will decrease.

- $110,000 increase for Parks Fees including Clinton Square due to increased participation in Park’s

programs and activities.

- Maintain interfund transfers of $4.3 million from the Aviation, Water and Sewer Funds.

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City Expenditures:

Decreased pension payments, change in the delivery model for retiree health care and lower debt service

payments all contribute to the overall decrease in general fund expenditures. Total expenditures in the General

Fund will decrease $7.4 million from $247.2 to $239.8 million in fiscal 2015-2016.

Departmental Expenditures

The City will see an increase of $2.1 million or 1.6% in departmental expenditures from the 2014-2015 budget.

This increase is primarily generated by increases in employee wages and salaries for those covered under

negotiated labor agreements. Increased reimbursements from other funds and a $700k decrease in functional

operating expenditures are also contributing factors.

Pension Costs

The City’s projected pension expense across all funds is estimated to be $26.4 million. This represents a $2.1

million decrease over the 2014-2015 budget. The contribution rates for both the Employee Retirement System

(ERS) and the Police and Fire Retirement System (PFRS) peaked in FY 2015.

FY 2016 will see a decrease in pension contribution rates which are as follows:

ERS from 20.3% to 18.8%

Police from 27.6% to 24.7%

Fire from 32.0% to 29.0%

Budgeted expenditures are based on salary and contribution rate projections provided by the New York State

retirement system a year in advance.

Since the City’s fiscal year straddles two different State Retirement years apportionment is necessary since the

state and the city have different fiscal year ends, March 31st and June 30

th respectively.

For the 2015-2016 budget, pension expense is based on the following calculations:

75% of FY 2016 NYS Retirement System projected costs

25% of FY 2017 projected costs internally calculated based on FY 2016 projected billings

The NYS Retirement System has not issued its FY 2017 projection by the time the City prepares its budget. We

calculate what we estimate the salaries will be based on the prior year and add in wage adjustments for

overtime, any contract settlements etc. Expected long term retirement contribution rates are projected to stay

flat for FY 2017.

The City will continue to pay its pension obligations in full and will not elect to amortize payments currently

allowed under the State’s Pension Stabilization Programs.

Healthcare Costs

Healthcare expenditures for both active and retired employees continue to rise slightly across all funds. The

City spent $44.8 million for the fiscal year ending June 30, 2014 and is projected to spend $45.6 million in the

current year. The estimate for 2015-2016 is $46 million.

Trend assumptions and inflationary factors of 6% for medical claims and 10% for prescription drugs were used

in our gross calculations.

We have been able to temper the increase with the following cost reduction measures:

In January of 2015 all Medicare eligible members were transitioned over to a fully insured

Medicare Advantage Plan administered by Humana Insurance Company.

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Implementation of an Employer Group Waiver Plan (EGWP) for prescription drug benefits paid

on behalf of all Medicare-eligible retirees. This assures maximization of all government and drug

company available subsidies.

Increased contributions under all bargaining unit contracts.

Since the City is self-insured for all healthcare costs, including medical, dental and vision it has no control over

the amount or the severity of medical claims. These costs will continue to rise as active employees become

retired employees and new employees are hired to replace them. Any achievement of future cost reductions will

require a change in plan design which must be negotiated with the labor unions.

There are currently 8,068 participants in the plan.

Expenditure assumptions include:

- A $1.5 million commitment to the Say Yes to Education Foundation.

- $2.6 million increase in salaries and wages for employees under negotiated contracts.

- $1.5 million in continued funding of the Greater Syracuse Property Development Corporation.

- $80,000 in funding for Tomorrow’s Neighborhood Today

- $50,000 in continued funding for Literacy Coalition of Onondaga County to foster childhood literacy

citywide.

- $301,000 reduction for system integration services in the Internet and Networking Services account.

- $250,000 for housing demolitions.

- Judgment and Claims account will continue to be budgeted at $1,000,000.

- $0 in allowances for negotiated wage increases. Since January 1, 2015 Firefighters Local 280 are

operating without a contract. The School Crossing Guards have been without a contract since July 1,

2011 and as of January 1, 2016 all seven remaining bargaining units will be out of contract.

- Cash Capital spending at the recommended 2015-16 level of $3.5 million per the approved City Capital

Improvement Plan.

- $3.9 million decrease in transfers to the Debt Service Fund to account for reduced principal and interest

payments on bonded debt.

- New Office of Innovation funded through a grant from Bloomberg Philanthropies. An Innovation Team

is tasked with finding creative and innovative solutions to pressing City problems.

All funding for the Board of Zoning Appeals, Board of Assessment Review and Summer Employment for At-

Risk Youth has been transferred to the operating departments that administer these programs.

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Mid Term Update

In late March, a binding interest arbitration panel awarded members of Firefighters Local 280 a retroactive two

percent wage raise for 2013 and 2014. It must be paid out by June 30, 2015 to avoid penalties. The cost of this

award is estimated at $2.6 million for the City’s general fund. The mid-year report did not take this expenditure

into account.

The mid-year report for 2014-15 that was filed with the Council on March 15, 2015 reported sales tax revenue

had increased over budgeted amounts by $241,400. The April 3, 2014 sales tax receipt of $14,027,442 was

1ower than budget. Annual sales tax revenue will now be adjusted to reflect a breakeven point for the year.

Special Funds:

The 2015-2016 budget requires no increase in the water and sewer rates. The current revenues generated by

each fund are sufficient to sustain operations.

The operating certificate for the Syracuse-Hancock International Airport was transferred from the City to the

Syracuse Regional Airport Authority (SRAA) on March 3, 2014. This transfer marked the final step in the

process to transition the airport to an independent public benefit corporation. The Aviation Enterprise Fund will

continue to exist as its employees will remain City of Syracuse employees until such time new bargaining

contracts are negotiated with the unions. These negotiations are currently in process.

The City’s General Fund will continue to receive cost reimbursements for services performed and the amount

of debt service to be paid on outstanding Airport bonds. All Airport bonds issued by the City remain the

obligation of the City. The City will recognize as revenue these payments from the SRAA to the City.

The Downtown Committee and Crouse –Marshall Special Assessment rates will remain at the same funding

level as in previous years.

City School District:

The School District has submitted a proposed budget of $391,203,254 that was voted by the Board of Education

on March 19, 2015. This represents a 4.2% increase over the prior year. The proposed budget is balanced based

on the assumption that an additional $12 million in Operating Aid will be granted. To date, the State has just

released the school aid runs and the District is evaluating the effect on the proposed budget. Components within

both the revenue and expense sections are expected to change to recognize changes in State funding, use of

Fund Balance and to make related updates to expenditures maintaining a balanced budget.

These changes will be made through Council amendments during the Budget approval process.

The 2015-16 proposed budget also proposes the use of one time revenues including $25 million in fund balance.

Additionally, the District’s request to use $31.7 million in State Chapter One accruals is included in the

proposed revenue plan. There is no increase in this amount from the previous year.

An additional fiscal challenge this year has been the reduction and expiration of several grants, including

School Improvement Grants, Teacher Incentive Fund, and Race to the Top. Expenditures to support these

programs will either be reduced or shifted to the General Fund.

The Board of Education will be adopting its final budget at their April 15, 2015 board meeting.

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This budget proposal includes the following highlights:

- Additional $12 million in State Aid will fund following initiatives:

$1.5 million-Services for English Language Learners

$2.0 million-Robust Career and Technical Education (CTE) programming

$2.0 million-High Quality Alternative Education Programming and Systems of Support

$5.5 million-Investment in Priority Schools

$1.0 million-Blended Learning Environments

- 70 new positions, 52 represent instructional staff

- $1.9 million increase for payments to charter schools for their increased enrollment

- District expenditures will increase 4.2 % or $15.9 million in the following areas:

o $9.6 million increase in salaries

o $1.6 million reduction in employee benefits

o $1.7 million increase in supplies and equipment

o $12.8 million increase in Contractual Expenditures

o $6.6 million reduction in Debt Service and other expenses

The District is currently negotiating new contracts with all bargaining units with the exception of the administrator’s

union. That contract will expire in July.

A tabular comparison of the 2014-15 and 2015-16 School budgets is displayed on page 289 of the budget.

Conclusion:

The City of Syracuse has made a significant progress in meeting the new challenges facing our community.

From dynamic investments in programs like Say Yes to Education and the Land Bank to making efficient

choices with healthcare and pensions, the City of Syracuse is a growing city on the move. Innovation and ideas

are the new way of leading a government and making decisions for a twenty first century city and Syracuse will

continue on our path of progress. The City will continue to exercise discipline over our finances and advocate

for fundamental reform and support on the state and federal levels.

As you begin your schedule of committee meetings and deliberations, I pledge my full cooperation, and that of

my staff, to assist in your review.

Sincerely,

Stephanie A. Miner

Mayor