In former Oneonta mayor Gary Herzig’s monthly column that ran in The Daily Star on Tuesday, April 8, both Herzig and the Common Council member he interviewed, Fifth Ward representative Len Carson, made statements about the city budget, spending allocations and Finance Director Virginia Lee’s compensation.
Lee clarified several of those statements in a follow-up email interview by The Daily Star on Wednesday.
Herzig discussed his reasoning for his statements with The Daily Star on Thursday, but Carson declined to respond to Lee’s follow-ups.
Herzig said that the city’s operating budget increased by $4.66 million, or 29%, in three years, from 2022 to 2025.
Lee said that number is inaccurate because Herzig was comparing the 2022 actual expenditures for the General Fund of $15,908,980 — which included $384,793 transferred to Capital Projects for airport and ARPA projects — with the 2025 total General Fund budget of $20,571,061.
By comparing apples to apples, the 2022 General Fund budget totaled $16,392,165 and the 2025 General Fund budget totaled $20,571,061 — an increase of $4.1 million, or 25.49%.
The revenue budget for 2022, without use of any fund balance, totaled $15,827,146, and in 2025 totaled $18,140,596 — an increase of $2,313,450, or 14.62%.
“When comparing increases from year-to-year, proper practice is to compare actuals to actuals, or budgets to budgets,” Lee said. “Actual expenditures can be understated due to vacancies, uncompleted projects, or overstated from unexpected expenditures.”
Herzig said Thursday that he took the numbers off the council-approved budget 2025 available on the city website.
“Based upon the numbers, we budgeted $4.66 million more in 2025 than what we spent in 2022,” he said.
Impacts on spending
Herzig said that inflation, city employee pay raises, creating new positions and increasing debt had the greatest impact on spending.
“The increase in debt needs clarification,” Lee said.
The current debt service increased $28,018; however, the total debt service increase also included $225,000 of interest for the bond anticipation note for the Market Street Transportation Improvement Projects. The plan is to institute paid parking in the future to generate revenues for the bond payment.
This plan has been endorsed by the city’s bond counsel, Lee said. Due to the more than $15 million in grants received for the Market Street Transportation Projects, the city is receiving a return on its investment of more than 206%.
Two other areas to consider are employee health care and retirement, she said.
The city joined the Cayuga Health Consortium which saved more than $500,000 city-wide in health insurance expense, which the city applied towards the salary increases.
“If we had not joined the consortium,” Lee said, “the health costs would be significantly greater.”
The state retirement system also had significant rate increases for the city’s contribution to the retirement system.
“The city was still catching up from COVID due to the department heads cutting over $2 million from expenditures during the pandemic,” Lee said. “Those projects/services still needed to be completed and it has taken time to catch up.”
Regarding the pay raises, the city performed a salary study and found that the city employees were being paid 69% to 89% of the market median.
“The city was losing trained, skilled, very much needed staff due to the low salaries and (the) council agreed that we needed to invest in our staff so the services could be provided to the community,” Lee said. “As a result, (the) council approved the collective bargaining agreements with the unions, and all non-union employees, adjusting salaries to be more competitive in recruitment and retention.”
Herzig said in response that, “I didn’t hear anything (in Lee’s response) that says my statement was incorrect, that the largest contributors were pay raises, new positions and increased debt.”
“I’m very happy that the city was able to save $500,000 in health benefit expenses,” he said, “but it should be pointed out that the spending certainly would have been even higher without that. I have no doubt that everything (Lee) is saying is accurate and correct, however it doesn’t change the fact that spending is $4.66 million more that spending in 2022, without a comparable increase in revenue, which is ridiculous considering the tax increases and taking considerable amounts of money every year from the city’s savings.”
Tyler Technologies
Herzig said that the city staff is advocating for new software — Tyler Technologies — “at a cost of $200,000 with a $150,000 recurring annual subscription.”
While the numbers were close, the statement was misleading, Lee said, by giving the impression that all the costs will be absorbed by the General Fund.
The current estimate for the one-time implementation is $258,788, to be shared equally between the General, Water and Sewer funds at $86,263 each.
The estimated annual subscription costs for all departmental funds would be $160,743. The annual increase, after eliminating the costs for the city’s current software, is estimated to be $25,544 for the General Fund, $21,729 for the Water and Sewer funds, and $15,527 for the Transit fund, with the Central Garage realizing a decrease of $1,159.
“Funding is approved at the time the capital project is approved,” Lee said. “The impact on the operating fund budgets will occur, if approved, beginning in 2026, therefore it will be budgeted.”
Hezig said that, “the water and sewer rates are already experiencing a 10% increase every year, so moving some of the expense to the Water and Sewer funds will only increase what the public is already experiencing on water rates.”
Lee’s compensation
Carson described Lee’s compensation arrangement as, “the largest double dip I’ve ever seen.”
Lee, a city employee for 36 years, retired at the end of 2024 and started collecting her state pension, but was immediately rehired by the council. Since Lee is retired, the city no longer contributes into the retirement system for her, saving about $20,000 per year.
“First let me (be) very clear, my personal finances are no one’s business,” Lee said. “However, I will answer the question … ‘Double-dipping’ implies that I am doing something illicit, illegal or inappropriate or that the city is paying me twice for my position and that is untrue … This is not the first time city retirees have been rehired by the city, some in a part-time status, some in full-time status.”
Lee has been the finance director since 2019 and planned to retire at the end of 2022, but the city was unable to hire someone to fill the finance director position.
“I confirmed with the State Retirement System that I was legally able to retire and be reappointed to my current position,” she said. “I am being paid by the state my full pension that I have earned over the past 36 years, the same as any retiree. I am also being paid for my current full-time job that I earn every day. Legally, I do not have any limits on what I am allowed to earn due to my age. When my replacement is hired, the city will likely be paying thousands of dollars more, for the offer made to my potential replacement last year was thousands more that I am currently making.”
The city intends to keep the current arrangement in place until a replacement finance director is found and the deputy/accountant position is filled. Lee would stay on for at least one year at full-time status for transition and training and then part-time for special projects, both contingent upon council approval.
“Since the fall of 2022, I have averaged 65 to 90 hours per week to the best of my ability to fulfill the workload duties of the finance office,” she said. “Let me be very clear — if the finance office fails, the city fails.”
Herzig said that he believes there is nothing illegal about the arrangement.
He pointed out that the Merriam-Webster dictionary uses the situation of, “(drawing) a pension from one government department while working for another” as an example of the definition of the word “double dip.”
How much out of savings
Herzig said that funding the 2025 budget required a 5.71% tax increase and taking more than $2.4 million out of “savings.” Lee said this statement is misleading.
The 2025 budget appropriated $1,680,056 from the unrestricted fund balance — a decrease of $154,240 from 2024 — and $750,409 from restricted reserves for approved purposes, “which is expected and proper when the reserves are created,” Lee said.
This comes to $2,430,465, Herzig’s cited number.
“Reserves are created when the city saves money at the end of the year and comes in under budget,” he said. “Instead of putting the money back into unrestricted reserves, they put it into restricted reserves. Both can be accurately called savings.
Property tax increase
Carson calculated that it would require a 34% increase in property taxes to balance the current budget.
“If the tax levy was increased to eliminate the appropriated fund balance, then the increase would be approximately 30-31%,” Lee said. “However, in my discussions with the council I recommended that in 2025 they increase the levy by $500,000 to $600,000, and then in the next budget process we would determine the need for the next increase. Council chose to increase the levy by $300,000.”
Annual debt payments
Carson cited an increase in borrowing which raised annual debt payments to more than $1 million, up from last year at $785,000.
The current debt service increased $28,018, but the total debt service increase also included $225,000 of interest for the Bond Anticipation Note for the Market Street Transportation Improvement Projects, Lee said.
“Please note that the city has a AA- with a stable outlook bond rating, one of the highest available in New York state,” she said.
Ambulance calls
Carson said Lee budgeted $1,500 for an ambulance call when the general rate is $700. She said this is inaccurate.
“The article stated ‘Why does she do that?’ Answer: I don’t,” Lee said.
Lee said she based the ambulance revenue budget on 2,200 annual billable calls. If she budgeted those calls at $1,500, then it would calculate to $3.3 million in revenue. In reality, she budgeted $1.1 million in 2025, or 2,200 calls at $500.
Ambulance fees are established based on payer mix, which includes private insurance and Medicare and Medicaid.
“We may collect $1,100 from a insurance company for an ambulance transport, while a Medicare or Medicaid payment for the same type of transport we may get paid $400 to $500,” Lee said, “and the city is not allowed to bill the patient the balance. This is why I budget $1.1 million and not $3.3 million, including an allowance for bad debt.”
When savings could run out
Herzig concluded by saying that the city’s savings, “may be gone in a few years without major cuts in spending along with increases in revenue.”
This statement needs context, Lee said.
“When a five-year projection is completed without any major changes, the fund balance will be depleted,” she said. “However, if changes are made at a slow and steady pace, the projections can be modified to ensure that the budget projections are stable.
There is a difference between a budget deficit and the actual fund balance, she said, and the city’s General Fund total balance is very strong.
“Since 2000, there were only two years whereby (the) unrestricted fund balance was not allocated within the budget,” she said, “and it also shows that the total fund balance has grown from $5.8 million to $16 million, with the unrestricted growing from $5 million to $7.4 million. I am projecting a small surplus for 2024 but I do not yet have the final numbers. The city’s fiscal stress score with the state is 0 — the best possible score.”
The city needs to either raise revenues and/or cut services, Lee said. However, “this should be done within each budget process with accurate information. If the city is successful in implementing the bed occupancy tax, this could potentially raise an estimated $375,000 to $400,000 in revenues, or the equivalent 6.7% to 7.2% tax levy increase. This will be huge for the city.”
“I believe Virginia Lee and I are on the same page,” Herzig said via email Thursday. “We both seem to agree that spending has increased by approximately $4 million in the past three years without a corresponding increase in revenue, and that projections show that we will deplete our savings within five years unless we increase revenue and/or cut spending.”