The dangers of Watertown using savings to offset tax hikes
WATERTOWN, New York (WWNY) - In the last two budgets, Watertown has used about $3.5 million each year from its fund balance. That’s basically the city’s savings account.
It’s a huge help in those budgets to avoid large tax increases, but it’s not an infinite pot to spend from.
“When that’s gone, it’s gone,” said City Manager Eric Wagenaar.
Right now, the city has about $13 million in savings but only a few million of that is really usable.
That’s because the city needs between $8 million and $10 million in the fund balance for cash flow and to maintain its credit rating.
Wagenaar says dipping too much into savings makes for difficult decisions.
“We have must-pay bills. When you get into that whole bonding discussion, we have ‘must funds’ - salaries, retirement and healthcare. We have to fund those. We have to pay our debt. We don’t have any flexibility in that,” he said.
Right now, the city has about $25 million in debt but three large costs are looming.
A new city courtroom and Department of Public Works building will likely run up a bill of more than $10 million.
The big hit will be the water disinfectant project, which the city has already approved bonding up to $61 million for, though grant money could cover around one-third.
They’re three more “must funds” the city will have to budget for, which will mean cuts elsewhere.
“When you talk about kicking the can down the road, maybe those two or three streets aren’t gonna get done now, or in the near future. Maybe some of the quality of life things we provide right now, we reduce those,” said Wagenaar.
The 2025-26 budget has an estimated deficit of $7.5 million. The following year it’s around a $12 million gap.
If the city wants to keep a healthy savings account, the fund balance will only put a dent in the deficit.
“We get audited every year. We have great marks right now on our auditing and how we’re paying our bills and how we’re managing our money. It’ll just get a little bit tighter,” said Wagenaar.
He says most cities in the Northeast are dealing with similar situations.
It’ll be up to city council and staff to navigate Watertown’s.
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