Panel endorses using $425,000 of fund balance

If city lawmakers choose not to use part of Kingston’s fund balance to pay off Kingston’s remaining debt to the state Retirement System, it would mean at least another five years of payments on a debt that has an average interest rate of more than 3 percent, the city comptroller said.

John Tuey told the Common Council’s Finance and Audit Committee on Wednesday that the money would pay off all of Kingston’s remaining loans with the Retirement System. He said there are several, with the oldest dating to 2013 and the newest from 2016.

“If we didn’t do anything, we’d be paying for another five or six years,” Tuey said.

Tuey said the loans are the result of Kingston taking advantage of a “Contribution Stabilization Program” from the Retirement System after the city saw a marked increase in its retirement bill from one year to the next following the 2007-09 recession. The increase, at the time, would have required an approximately $1 million local property tax levy increase, he said. Tuey said the state program allowed municipalities to borrow part of that increased cost over time.

Mayor Steve Noble has proposed using $425,000 from the city’s fund balance to pay off the remaining retirement debt and to purchase four new vehicles for the Kingston Police Department.

The committee on Tuesday endorsed two resolutions to bring that proposal to fruition. One authorized the use of $235,000 of the fund balance to pay off all remaining amortizations with the state Retirement System, while the other authorized using $190,000 of the fund balance to purchase four new police vehicles.

The resolutions still must be voted on by the full council, which meets again next month.

Noble has said the city’s unassigned audited fund balance was $8,176,266 at the end of 2018. That means the city’s general fund unassigned balance equaled 18.6 percent of what is budgeted to be spent by the city this year, he said.

The city’s policy is to keep its fund balance between 10 and 13 percent of annual budgeted expenditures. If the excess money is spent, it cannot be used on anything that would create a recurring cost, according to the policy.

Tuey said the national Government Finance Officers Association recommends municipalities keep between 10 and 15 percent of their annual budgeted expenditures as a fund balance. He said the $425,000 in fund balance spending endorsed by the committee would join another $1,592,500 from the fund balance that was approved to be spent earlier this year. That would bring the remaining balance closer to the 13 percent range but still above the policy amount, Tuey said.

Tuey told lawmakers that if they used the money from

the fund balance to reduce the tax levy in the city’s annual budget, a “structural imbalance” would result.

“It’s considered deficit budgeting,” Tuey said. “It’s a risky way to go, in my opinion.”

He said the most prudent thing to do is use the fund balance money to pay off debt or acquire assets that otherwise would require the city to borrow money.

Tuey said police vehicles are the shortest-lived of the city’s assets and that using the fund balance to buy new ones would save on interest costs.

Police Chief Egidio Tinti said the new vehicles would replace four that could be moved to the detectives or administrators in the department, or moved to another city department. Tinti said if there is no city use for the old vehicles, they could be sold at a police auction.

This is not the first time the city has considered using fund balance money to pay for retirement costs and new vehicles.

Last November, the council authorized using $777,787 of the fund balance at that time to pay off part of the remaining amortizations with the state Retirement System, as well as another $271,500 for the purchase of three police vehicles, a response vehicle for a deputy fire chief, two all-wheel-drive hybrid vehicles for the Building Department, and one allwheel-drive hybrid vehicle for the parking division.

In July, the council authorized using another $390,000 from the fund balance for the state retirement payments, as well as $350,000 to pave city streets.