City Council: Conflicts Over Furlough Program and Confusion Over When The City Could Run Out of Money

During her time in office Finance Commissioner Michele Madigan has crafted a fiscal program for Saratoga Springs that is the envy of most municipalities in New York State. The high marks awarded to the city by the bond rating agencies are a particular source of pride. They are an acknowledgement not only of the city’s sound fund balances but of the overall management of its finances.

Now the city faces a financial tsunami. For all her creativeness and perseverance, Commissioner Madigan is confronted by a set of problems that can only be addressed by painful actions. Success is an irrelevant concept.

Commissioner Madigan is a person who takes her responsibilities personally. She is concerned not only for the city employees who may lose their jobs but for our beautiful city which relies on sufficient staffing to maintain its infrastructure, its safety, and its quality of life.

In our form of government, in addition to managing the city’s finances, Commissioner Madigan is charged with crafting the city’s budget. It is hard to overstate the amount of pressure she is under as the city faces an unprecedented financial crisis brought on by the pandemic.

Regrettably, the strain has been reflected in a number of recent episodes.

On May 6 she held a press conference to present her plan to address the crisis. She highlighted a plan that involved furloughing city employees to reduce the city’s spending. By furloughing the employees rather than laying them off, they would continue to be eligible for city health insurance. In addition to the regular unemployment insurance they would all be eligible for federal payments of $600.00 per week until the end of July.

Unfortunately, the press conference involved no written materials. It projected that the city faced a short fall for the year of between $14,000,000.00 and $16,000,000.00 and Commissioner Madigan identified a number of areas where moneys might be found to fill the gap. This included achieving $3,000,000.00 in savings from the furloughs. What the press conference did not address was what drastic measures would have to be taken to try to save $3,000,000.00 in a compressed period of less than three months. In fact, Commissioner Madigan had informed her colleagues on the Council that both the Public Safety Department and the Department of Public Works would need to furlough 45% of their staff while the remaining departments would each need to furlough 20% of their staffs to achieve this savings . As she would subsequently concede, these draconian cuts were unattainable.

At the time, Commissioner John Franck questioned the feasibility of achieving such huge savings through furloughs. In particular he requested a breakdown of the monthly cash flow projections for the year. As he would explain to me later, to assess the city’s condition he needed to know how much time there was before the city would face insolvency. The city’s expenses and its income varies considerably month by month due to the fact that large expenses and major revenue events are not spread out evenly throughout the year. Commissioner Franck is a CPA. He told me that in his work he had been regularly called on to provide consulting to companies facing fiscal crises. He noted that one of his first concerns is to establish how much time there is to work out a solution. In addition strategies often entail managing cash flow.

Commissioner Madigan refused to provide him the numbers. The conflict between the two commissioners became the subject of a Wendy Liberatore article in the Times Union.

“I’m not holding back information when it comes to the fiscal bottom-line,” Madigan said. “Revenues are down and are projected to come in at a $14-to $16-million shortfall, therefore will not meet projected expenses. I have discussed this at length and will continue to do so at city council meetings and press conferences.”

“This is a pattern with him [John Franck],” Madigan said. “I have done my analysis and it’s not so easy to find all this stuff he is looking for.”

“The bottom line is we are not unique,” she said. “We will run out of money, we need to cut expenses and I’ve offered up every bit of cash and projected revenue I am able to meet projected expenses.”

“There are 464 CPAs in Saratoga County, should I send numbers to them too?,” she asked. “If he would like to be the commissioner of finance he can run for this office. … I have held nothing back from any council member or the public or the press.”

Times Union May 11, 2020

The reality is that Commissioner Madigan up to this point has not provided the Council or the public the cash flow projections which are critical to assessing any plan to address our short fall.

The Special Meeting Of The Council

In the meantime, the Mayor’s team was feverishly trying to implement the furlough program. As the federal $600.00 supplement would end on July 31, it was essential to make the program happen as soon as possible. The clock was ticking and every day the furloughs were delayed lessened the amount of money the city could save with this program.

The process was complex. The city could not require employees to sign on to the furlough program. It had to be voluntary so the unions representing city employees had to be convinced of the value of the program and a variety of related legal issues had to be resolved. City employees also had to be informed about the benefits of the program and then individuals had to volunteer. This involved many hours for both the Mayor’s staff and the Human Resources department to negotiate what is called a Memo of Understanding with the unions spelling out how the furloughs would be implemented.

The final result of the negotiations was that 43 employees representing 15% of the city’s employees agreed to be furloughed. Their combined salaries were about $450,000.00. Unfortunately this did not represent the actual savings. I am not clear about all of the issues in arriving at this number but I do know that the city was required to pay for 38% of the unemployment benefits provided. The final savings ended up to be $270,000.00.

The Council voted four to one in favor of the Memos of Understanding with the unions. Members of the City Council and City Attorney Vincent DeLeonardis made clear that they were aware that the savings achieved by the MOUs was modest and that it in no way resolved the city’s looming deficit. They emphasized that the MOUs were just the beginning of a very difficult process.

Commissioner Madigan was the dissenting vote. In explaining her “no” vote she told the Council that the amount of savings was utterly inadequate and that the city needed to go back to the unions to negotiate for far more ignoring attorney DeLeonardis statement that the furlough savings were only a first step. She acknowledged that her target of $3,000,000.00 from furloughs had been unobtainable. Apparently, while the mayor’s staff and the human resources were trying to hammer out the furlough program, she revised her plan to call for savings of $1,500,000.00 to $1,700,000.00 in “actual wage and related expenses” over ninety days rather than the end of July. I am not sure what the qualifier “related expenses” means. In addition she had now added $1,500,000 to $1,700,000.00 in savings from reductions in union contractual obligations. I am unclear what this means but added to the “actual wages and related expenses” the target was now $3,000,000.00 to $3,400,000.00.

The reality is that furloughs, unlike layoffs, require that unions agree to them. The City Council cannot dictate that staff involuntarily furlough. The Mayor’s staff did their best to implement the furlough program. Given the unions’ response and the limited time, the $270,000.00 savings was the best they could do with this particular element of the plan to address the city’s looming deficit.

If Commissioner Madigan had voted for the deal but strenuously asserted that it does not get us where we need to go I could understand her thinking although she would be pointing out a reality that everyone on the council was keenly aware of. What I cannot understand is why she would vote against any savings.

How Close Are We To Collapse?

What I found really disturbing was statements Commissioner Madigan made that suggested the city might run out of money to meet its expenses in the near future. She repeatedly referenced a crisis in cash flow (enough money to pay bills) and asserted she needed more money to meet the city’s obligations.

Here again she raises the specter of a potential default:

A Crying Need For Clear Information

Ignorance breeds fear and suspicion. What is most needed is a document that explains to the public not only the short fall for the year but documents when the city might not be able to meet its payroll obligations if drastic measures are not taken. People deserve to understand the truth about what the Council must deal with.

Commissioner Madigan has demonstrated over her terms not only her grasp of the details of the city’s finances but her skill in communicating both the challenges and achievements of her office. I have every confidence that she can provide this community the information it needs to understand both the daunting challenges we must overcome and the kinds of sacrifices that we will need to bear in protecting Saratoga Springs.

13 thoughts on “City Council: Conflicts Over Furlough Program and Confusion Over When The City Could Run Out of Money”

  1. While you may have a point that the public can benefit from more specifics, I challenge Commissioner Franck’s insistence that he is not getting what he needs. As a CPA, as is quick to remind us, I’m thinking he has the ability and knowledge to go into the city’s budget and finance to find all this out for himself. These are public files and while I may not be able to make sense of them, I’m sure Commissioner Franck can. All he needs to do is take the time – time that Commissioner Madigan has very little of these days (to hand deliver this information to him)

    Liked by 3 people

  2. Bad enough that the fire in City Hall put us in a bad fiscal situation. Important projects were postponed because of the fire, and related expenses, even after insurance money was paid to the city. The sacred cows, the SSPD and SSFD, will need to cooperate in this extreme financial crisis. Cancel the PR parade of horses, cancel the K9. Get back to reality and furlough some of those patrol cars that sit in the street every day. Time to get serious.

    Liked by 1 person

    1. I actually agree with some of what Henry37 said. This IS an extreme financial crisis. Saratoga Springs had been so successful because of our support from the very sources that are most vulnerable to the COVID-19 realities. We were better off than most municipalities in the past but will be suffering more significantly than others in 2020 and possibly in 2021. One saving grace will be that some of our expenses will be reduced since there will be less demand for City services due to fewer visitors, conventions, special events, etc. Unfortunately, this will not be nearly enough to spare us from the urgent need to drastically reduce the number of employees from nearly every department with the exception of Fire/EMS. Major projects and scheduled upgrades will have to be postponed. We will have to raise property taxes. There are a number of City fees that have not been raised in years that must be adjusted upward. All reserves will have to be spent down. There are no comfortable choices here.

      Chris Mathiesen

      Liked by 2 people

  3. Madigan should give Franck the monthly cash flow numbers along with other members of the Council……data, data and more data has to be available for each Council member…aren’t we in this together Michele?

    Liked by 1 person

    1. It’s not like their offices are miles apart. Franck’s Deputy can mosey over to Finance and just look at the budget and accounts payable, receivable. It’s not rocket science. Sounds like a stall tactic, which is not cute during a pandemic. C’mon people, smile on your brother, everybody get together, RIGHT NOW.

      Liked by 1 person

    2. Nothing has been kept from the council. They all have the budgets, quarterly reports, know the major revenues and expenses. Have you listened to all of Commissioner Madigan’s presentations? Have you read the meeting minutes? March sales tax came in at 25 percent below March 2019. These numbers were presented the to the council immediately. Data is always presented quarterly, and now is being up dated as soon as new numbers come in.
      SPAC is closing, The track, if they do run, it will with out fans. With out those venues the city will not see over a Million tourist this season. Tourist that stay in our hotels, eat in our restaurants, shop in our downtown stores. All the DATA in the world is not going to change the fact that the city will not be receiving Millions and Millions of revenue that has been a regular part of our operating budget.
      I am grateful that Commissioner Madigan has done her job and presented our council with the hard economic realities that the city faces. It is not time to be questioning her, it is time to be confronting the hard choice that must be made…..

      Liked by 3 people

  4. Perhaps this is a good time to remind state and federal officials how Saratoga Hospital agreed to take COVID patients from downstate (https://saratogaspringspolitics.com/2020/04/04/letter-from-commissioner-dalton-and-mayor-kelly-re-saratoga-hospital-accepting-nyc-patients/#comments), and that we paid $65,000 for homeless people, 75% of which do not reside in the city, to stay at the Holiday Inn during this pandemic (https://www.timesunion.com/news/article/Saratoga-Springs-loses-funding-resources-by-15283470.php).

    It is my hope that Saratoga’s extension of a helping hand does not result in old adage of “no good deed goes unpunished”.

    And while Michele Madigan may be delivering news that people don’t want to hear, I commend her for her approach on not kicking the can down the road and not employing a standard knee-jerk reaction for some to say “we must raise taxes”.

    Raising taxes on local residents should only be considered after every other possible measure has been exhausted. Unfortunately, that may mean some layoffs, furloughs or pay freezes for the unions. It is a reality that all unions across the country are dealing with right now, including schools.

    Bipartisan efforts, such as the SMART Act, may be why some of our leaders seem to be hedging on Madigan’s assertions. Let’s hope that it happens and that our local economy bounces back swiftly.

    Liked by 4 people

  5. C’mon, really?
    1. How many times does Madigan have to tell you and everyone else that June is a big month for expense payments, that revenues aren’t coming in, and that the city only has enough cash on hand to get through another month or so? Did she need to write that down on a piece of paper and hand it you at the press conference in addition to her numerous statements to that effect?
    2. I hear ONE elected official telling everyone that we have a massive revenue shortfall, and that cash isn’t coming in, so we got to do something pronto to avoid mass layoffs this year and to have any hope of a workable budget next year, and I hear people like John Kaufmann and John Franck asking her to spin her wheels and provide detailed data to them to convince them of the obvious (duh, its a pandemic with massive macroeconomic dislocation) instead of working with her to make the difficult choices that will help to minimize unavoidable pain. Good god, she is save jobs without ridiculous tax hikes, sounds good to me!
    3. If you are correct that Madigan indicated that DPS and DPW needed to furlough 45% of their staff, and if you are also correct that furloughs MUST be voluntary (thats news to a lot of furloughed public employees over the years, I am sure), then the Mayor and her negotiating team should not have wasted their time, and told Madigan that it wouldn’t work. That would have allowed other options to be explored. You claim that Madigan admitted that $3M was unobtainable, but from where I sit and what I see and hear, I suspect she meant she was expecting to get close to it, not to get less than 10% of it.
    4. MAYBE we’ll get federal help, maybe not, but I’d rather not sit back and wait and run out of cash while we find out. Unfortunately, we now have to borrow over $6M that needs to be paid back within a year – at what interest rate? – just to meet payroll.

    Perhaps, instead of castigating the one person who is trying to get us all to see reality for what it is, people with the ability to do something about it could get on board with her and try to stave off catastrophe.

    Liked by 2 people

  6. Catastrophe? Our debt is now almost equals our total budget! This TAN loan is going to be a high interest rate loan—–what will that do to our bond rating?—we have reached hammer time and the big squeeze is here, can’t furlough from that and this ISSUE needs full disclosure and ALL hands on deck.

    Liked by 1 person

    1. Commissioner Dalton: Are you listening? Or are you still into the PR mode?
      45% is the request, don’t make it an order. Do it now. Bite the bullet. This is Saratoga Springs, not some city with a high crime rate. I counted 11 patrol cars and investigator cars parked on Maple Ave. yesterday. And, if there is a major fire, you can always call in those firemen who were laid off/furloughed, or mutual aid.

      Like

      1. I don’t know where you live but I live about 3 blocks from downtown and last night there were so many sirens I actually put on facebook my concern (I really thought there was some big event) and received a response from Commissioner Dalton about the extra activity. Yes, this department may need to be cut but I don’t for one moment doubt the Commissioners concern about this and her motivation in keeping out city safe.

        And, this is a Commissioner who has been working many hours not only doing what is best for her staff (police and fire) but also in trying to help the moral of our city – what you call PR. Perhaps if you are truly thinking in the best interest of the city and not in an attempt to simply criticize, you might have some suggestions without the snark attached.

        Like

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