Utica's budget proposal includes a 16.5% property tax hike. Why the mayor says it's needed

Newly elected Utica Mayor Mike Galime has proposed raising his city property taxes by $504 a year.

The 16.5% tax increase in his proposed $87.1 million fiscal year 2024-25 budget would work out to $245 a year for the average Utica homeowner with an assessment of $55,000.

The size of the proposed increase comes as a shock to many after the previous administration of former Mayor Robert Palmieri raised taxes a total of just under 24% over 12 years.

But, the big increase is needed, Galime argued, because the Palmieri administration failed to increase taxes as expenses rose in its final two budgets.

Galime tried to sound the alarm on many of the issues when he was council president, but criticisms were dismissed as political or troublemaking, he said. 

“The biggest reason for what’s going on right now is we’ve never accounted for any of the increasing expenses in the economy; our raises, which have been contractual; our increasing health care costs,” he said. “We’ve not planned for the future and these are administrative tasks. This is part of the executive branch of government.”

Palmieri dismissed the criticism in a released statement, which noted that the city is in a much better financial position than it was when he became mayor in 2012.

“After some difficult decisions in 2012, the city of Utica has been able to avoid wild tax increases and budget swings for a decade. There is no fiscal emergency in Utica and the city is set up for long-term success. There are always difficult decisions to be made at budget time.”

Balancing act

The new mayor faced three means of balancing this year’s budget, Galime stressed: raising taxes by as much as 24%, using up to $7 million of the city’s diminishing reserves and cutting the budget. But public safety accounts for 65% of the budget.

“The impact of cutting police would be far worse than the tax increase the residential population is seeing right now,” he said. “This city has seen extraordinary growth and redevelopment over the past few decades and to stop taking care of the city around that now because we have to make up for lost time would be a mistake.”

But using too much fund balance would be fiscally irresponsible, hurting the city’s bond ratings and compounding the amount of an eventual tax increase, he continued.

So Galime chose a middle road of the tax increase, paired with using $3.2 million out of the city’s reserves.

The Common Council must pass a budget by March 20.

Reaction in Common Council

Democratic members of the Common Council have responded to the proposed budget by attacking it with a magnifying glass and financial X-ACTO knives, looking for potential cuts. During a special meeting on Tuesday, they presented 45 amendments to the budget, all of which were sent to committee.

The proposed changes ranged from $150 to $222,000. Many lowered spending on line items based on three-year spending averages. The suggested cuts included one position a purchasing agent who’s duties would be taken over by the budget director and by a purchasing agreement with Oneida County.

But Councilwoman Samantha Colosimo-Testa warned that county officials told her the county had never approved that agreement.

The proposed amendments also increased some revenue projections, adding in revenues from a 3% sales tax on cannabis that was not already in the budget and collections from deploying 310 parking meters already purchased by the city.

The amendments propose a total of $2.1 million in cuts or increased revenues, Councilwoman Katie Aiello said.

Jack LoMedico, a Democrat and chairman of the Committee as a Whole, said last week that Democrats have come up with 51 budget amendments totaling more than $4 million, although they were not all introduced at Tuesday’s special meeting.

No one expects them all to get passed, but they at least want the mayor and council to take a look at them, he said.

“A number of us councilmen don’t think that the city at this time with a median income of $25,000 … has any right to increase the taxes this much,” LoMedico said in reference to the increase proposed in the mayor’s budget.

For years the city was able to avoid tax increases or keep them to 2% while putting money into the reserve fund, he said.

“(The mayor) is going to have to make some hard decisions,” LoMedico said, “and we’re helping him with them.”

Galime’s replacement as Common Council president, fellow Republican Rocco Giruzzi, said he wasn’t exactly shocked to see such a large tax increase in Galime’s proposed budget.

“I think Mayor Palmieri did the best job that he possibly could,” he said. “A lot of times, I think, they hang their hat on 0%, 0%, 0% with school taxes, with city taxes. A lot of times when there’s a new administration that takes over, you realize that maybe 0% wasn’t the best.”

He expressed some optimism that the Common Council will find ways to bring the increase down, but noted that cutting is difficult at a time when prices keep going up. In the end, he said he has confidence in the mayor and in his love for the city.

“There’s no way in heck he would want a 16.5% increase,” Giruzzi said, “unless he really had to.”

Sunny days

There’s no doubt that the city got used to good financial news during Palmieri’s three terms. Here are some of the changes that took place since 2012:

• The city’s fund balance of negative $15,000 in 2012 rose to $14.1 million by the end of fiscal year 2022.

• The city’s credit ratings improved with Fitch Ratings, Moody’s and Standard & Poor’s Global Ratings all upgrading the city’s rating. In 2023, Standard & Poor’s gave Utica an A (Stable)rating, its highest since at least 1987.

• Utica earned a fiscal stress score of 0 from New York State Comptroller Thomas DiNapoli in 2023. It was 73.8 in 20212,

• The city experienced budget surpluses from fiscal year 2013 through fiscal year 2022.

How did this happen?

Unfortunately, the financial good times stopped rolling in 2022 when the budget surpluses turned into deficits, Galime said.

An audit of fiscal year 2023, not completed until late January after Galime had become mayor, showed the city running over budget by nearly $2.4 million, Galime said. The fund balance at the end of fiscal year 2023 had fallen to $12.8 million, he said.

The current fiscal year is projected to end with a budget deficit of nearly $1.9 million and a fund balance down to $10.9 million, Galime said.

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This year’s proposed budget ended up with a $7.2 million gap,

The biggest reasons behind the growing budgets and shortfalls, Galime said, is simply rising expenses: contractual obligations, inflation, infrastructure and repairs.  The current fiscal year budget didn’t include any money for the increased costs that resulted from signing a new contract with firefighters, he said.

State retirement costs went up $1.9 million, health care costs $1 million, contract costs $2.9 million and debt service $1.2 million in this year’s budget, for example.

“The whole point is that we refused to budget for things that we knew were coming,” he said. “When I say we, I mean the prior administration. The prior administration failed to budget things they knew were coming and now I have to make up for that plus all the mandated contractual increases year over year.”

In his statement, Palmieri stuck by the fiscal soundness of his administration and the tough decisions it had to make to achieve those results. But even he cut the new mayor some slack.

“Budget season is a difficult time to be mayor,” he acknowledged at the end of his statement. “The people elected Mayor Mike Galime to navigate the challenges that come with the budget. I respect him and trust he has the best interest of taxpayers in his heart.”

This article originally appeared on Observer-Dispatch: Utica Mayor Mike Galime proposes property tax increase in new budget