Lockport Mayor Anne McCaffrey addresses the issue of city finances in a press conference held at City Hall this afternoon. (PHOTOS BY HEATHER N. GRIMMER / ENP PHOTOGRAPHER)

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Lockport Mayor Anne McCaffrey said this afternoon in a 2:20 p.m. press conference that the city is working diligently to right its financial ship while complying with orders from the state comptroller's office.

To a large degree, McCaffrey inherited the problem of the city's coffers being empty when she inherited the mayor's seat in March following the resignation of former Mayor Mike Tucker. Since she's taken office, she said she's "made many necessary and difficult decisions and I will continue to make tough choices on behalf of Lockport taxpayers."

One of the things that McCaffrey is looking into is the restructuring of the city treasurer's office.

"We recently brought in an accounting consultant to assist in correcting our financial statements and provide us with a more accurate accounting of the city's finances," she said.

The accounting in the treasurer's office has been called into question by the state comptroller's office. In fact, the report released this morning — the reason for the press conference this afternoon — said, "Auditors found the city’s treasurer failed to maintain accurate accounting records or prepare an adequate cash-flow analysis. The city’s audited financial statements for the fiscal year ending Dec. 31, 2012 included account balances that were materially misstated, leaving the city council and the mayor’s office without reliable financial information that would have alerted them to the impending financial crisis."

McCaffrey refused to answer questions from the press concerning City Treasurer Mike White's performance, but did state that he has informed her that he is contemplating not seeking election next year. She said that she had neither asked for nor had he offered his resignation, however.

"As I indicated in my response to the comptrollers last month, I am working on restructuring the treasurer's office to ensure that accurate and timely accounting records will be maintained going forward," she said. "The Common Council and I will be finalizing that plan in the coming weeks."

White, in a prepared statement of his own, accepted responsibility for the operations of his office for the past several years. However, he indicated that the issue of city insolvency is not one that only goes back a few years.

"It didn't happen overnight and it won't be solved overnight," White said following the mayor's press conference. "This goes back probably 10, 15, 20 years."

White said that communication issues with the Tucker administration hindered his office as well. "Each and every time we asked for the help we needed, it fell on deaf ears."

Staff cutbacks over the years made it difficult — if not impossible — for his office to perform their duties, he said. "You could have the greatest accountant in the world here but if they don't have the tools to get the job done, it's not going to happen."

In the end, however, he said the problem with city finances comes down to improper budgeting. "If you're overestimating the revenues and underestimating the expenses, you have an issue," he said.

Barring an influx of funds, the city is expected to have no money within the next month, according to the state auditor's report: "A cash-flow analysis prepared by DiNapoli’s auditors found not only that Lockport will soon run out of cash, but that the city’s cash-flow deficiency will grow to nearly $4.6 million by Dec. 31."

McCaffrey said that the city is hoping to obtain that influx soon, as the state legislature has approved the city's borrowing of up to $5.35 million to help eliminate that immediate burden and allow the city to pay it back over a longer period of time — 10 years. The governor's office has not yet signed that bill.

White concurred with McCaffrey that the city has done its due diligence to fixing financial matters — especially since she took office. In fact, he referred to her as "a godsend to this community."

"In closing," White said in his press release, "communication in the administration has moved light years ahead and we are implementing a comprehensive plan to move this city forward in conjunction with the state comptroller's office."

Another avenue McCaffrey mentioned in the plight to save money is the elimination of the city's ambulance service by the Lockport Fire Department and restructuring of that department to reduce the minimum manning levels per shift. While the city's ambulance service brings in about $600,000 per year, she estimated that it costs the city about $1 million per year, meaning eliminating it would save about $400,000 per year. McCaffrey said the switch to a private provider should be finished by Sept. 15.

Also, McCaffrey said, the city is looking into selling off some surplus items and will, in fact, be doing so tonight at the Common Council meeting at 6 p.m.

"I am confident that the city's best days lie ahead," McCaffrey said.

RELATED: 

• Mayor Anne McCaffrey's statement
• City Treasurer Mike White's statement
• State Comptroller Tom DiNaploli's statement
• The state audit report

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A statement released this morning by the state comptroller's office says that the city of Lockport is facing severe financial issues — and will run out of money soon unless new revenue is found or expenses are drastically cut.

The statement in its entirety follows:

The city of Lockport will run out of cash to pay for operations in the very near future unless it secures new financing or drastically cuts expenditures, according to an audit released today by New York State Comptroller Thomas P. DiNapoli. The city’s financial troubles stem from poor record keeping and a reliance on fund balance to finance operations.

“The city of Lockport’s accounting records are in such poor condition that city officials were in the dark about the true severity of their fiscal problems,” DiNapoli said. “Now, Lockport has to make some difficult choices to address its financial woes. City officials need to get a handle on the city’s finances immediately and create a multiyear financial plan with budgets that only spend what the city takes in.”

A cash-flow analysis prepared by DiNapoli’s auditors found not only that Lockport will soon run out of cash, but that the city’s cash-flow deficiency will grow to nearly $4.6 million by Dec. 31.

Cash shortfalls occur when bills must be paid before revenue is received to pay them. Cash shortfalls also happen when expenditures consistently exceed revenue in a fiscal year, and officials use available fund balance to finance the difference until it is depleted, which was the case in Lockport.

Auditors found the city’s treasurer failed to maintain accurate accounting records or prepare an adequate cash-flow analysis. The city’s audited financial statements for the fiscal year ending Dec. 31, 2012 included account balances that were materially misstated, leaving the city council and the mayor’s office without reliable financial information that would have alerted them to the impending financial crisis.

The books for the 2013 fiscal year were not closed as of June 2014. However, the general ledger cash balances were unreliable and were not reconciled to cash in the bank. Further, the external audit of the city’s 2013 financial statements is months from completion.

In October 2013, the city issued a $2.7 million revenue anticipation note (RAN) for cash-flow purposes. In early 2014, the treasurer’s office set aside $2.7 million to repay the RAN when it matures in October 2014. That money cannot be used to fund current operations, significantly increasing Lockport’s cash-flow problem.

The state Legislature has passed a bill that would authorize the city to issue deficit financing to address the accumulated deficits from previous fiscal years. The bill had not yet been submitted to the Governor for his consideration. While this would help address the city’s immediate fiscal problems, further action will be needed to address the underlying causes of the city’s poor financial condition and its unreliable financial records.

DiNapoli recommended the city treasurer and council:

• Ensure that the city’s accounting records are complete, accurate and maintained in a timely manner so that the council and city officials can properly assess the magnitude of the city’s fiscal problems and subsequently monitor financial activity; 

• Prepare adequate cash-flow analyses and provide them to the council for review; 

• Develop a multiyear fiscal plan that builds a cash balance sufficient to eliminate the need for significant short-term cash flow borrowing; and 

• Adopt structurally balanced budgets that rely on recurring revenues to fund recurring expenditures.

City officials agreed with the audit and have begun taking steps to correct the problems. For a copy of the report visit: http://www.osc.state.ny.us/localgov/audits/cities/2014/lockport.pdf

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Lockport Mayor Anne McCaffrey will hold a press conference at 2 p.m. at City Hall to discuss the findings of the audit done by the state comptroller's office.

The comptroller's office issued a statement earlier today about Lockport finances.

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