Mayor of Poughkeepsie Rob Rolison was unaware of what he would find when he began the process of determining his budget. After several months of work, his administration announced that the City of Poughkeepsie is in serious financial trouble. The debt totals more than $7.8 million, not including the $11 million from the general-use fund deficit, a back-up fund for rainy days.
Since winning the mayoral race in early November, Rolison has worked on determining how and where the government will allocate funds for the next year. “We need to fully understand the financial picture of the city, and I think right now we don’t know that and I’m concerned about that,” Rolison said. “We have not been given a very accurate financial picture, because we’re still trying to get the budget in a form that has detail to it” (Poughkeepsie Journal, “City of Poughkeepsie owes $7.8 million and counting,” 02.03.16). After conducting an investigation to determine the capital for the city, Rolison found a series of unpaid debts including to the New York State Pensions Fund, the Poughkeepsie City School District, and vendors for services rendered to Poughkeepsie (Poughkeepsie Journal, “City of Poughkeepsie owes $7.8 million and counting,” 02.03.16).
Such financial troubles are not unheard of in the Hudson Valley. Dutchess County has had a history of financial issues, the most recent of which started in the early 1990s when the I.B.M. Corporation acted as the linchpin of the region’s economy. As the largest private Hudson Valley employer with over 20,000 employees, the multinational technology and consulting corporation largely shaped local economy until 1992 when it suffered a $5.46 billion loss, as sales decreased when people started to purchase newer computer models (The New York Times, “I.B.M. Posts $5.46 Billion Loss for 4th Quarter; 1992’s Deficit is Biggest in US Business”, 01.20.93).
The job cuts also took away crucial benefits for thousands of residents, as well as economic stability and security from the region. While county officials tried to remain positive at the time, arguing that the cuts would make the company stronger in the long run, the effects of the cuts were seen in multiple sectors, including real estate, education, retail and charity support (NY Times, “Hudson Valley Reels Under Impact of I.B.M. Cuts,” 12.18.91). Unemployment skyrocketed from three percent in 1990 to 10.8 percent in 1993 and a large portion of the population decided to move to New York City to look for new employment, leaving the few remaining businesses having to rely heavily on government support. The increasing pressure and financial strains led to a downward spiral of economic deterioration in the Hudson Valley.
20 years later, the City of Poughkeepsie still struggles from economic instability. Recent attempts to remedy the declining number of jobs and city resources have resulted in failure. In 2013, the Poughkeepsie-Newburgh region was ranked as having the worst economic growth out of 100 metropolitan areas in the country, with the gross metropolitan product dropping one percent between 2012 and 2013 (Poughkeepsie Journal, “Report: Poughkeepsie-Newburgh region had worst economic growth in 2013,” 06.25.14). In a 2012 City of Poughkeepsie City Hall press release, the City of Poughkeepsie reported that it was experiencing the worst economic conditions it had seen since the Great Depression, citing the situation as the consequence of a lag in property tax collection, in addition to water and sewer bill payments (City of Poughkeepsie Archives, “City projects $3.6 million shortfall”, 08.29.12).
A lack of financial support for current expenditures, diminishing subsidies and structural imbalances are just parts of the problem. As a result of these conditions, residents face declining of home values, increasing unemployment rates and rising costs of basic living necessities. According to the US Census, almost 25 percent of Poughkeepsie residents live below the poverty line, a figure 10 percent higher than the national average (United States Census Bureau, “Poughkeepsie City Census,” 12.02.15). Some of the biggest contributors to the annual budget shortfall included rising health insurance costs and pension payments, as well as a reduction in city-regulated sales tax (City of Poughkeepsie Archives, “City projects $3.6 million shortfall,” 08.29.12). Former mayor John Tkazyik claimed in a budget message in 2012 that he would leave the city in a stable foundation for the next mayor, yet by the 2015 elections, the city was considered by economists as a city of financial burden to a county of relative overall stability (Poughkeepsie Journal, “City set for leadership change,” 11.02.15).
During a lecture about local economic development at Vassar College, Executive of Dutchess County Dutchess County Marc Molinaro said that Poughkeepsie’s financial problems can be blamed on the previous mayor’s initiatives intended to increase urban development in the city. Molinaro explained the contradiction of how a main pedestrian plaza was closed, yet a nearby mall was reestablished. “[The Main Mall] was once Main Street, but during urban renewal they closed it to create a pedestrian plaza, and then they took all the cars are put them on the arterial and you know how many pedestrians walk on a plaza that no cars can drive on? Nobody. There was no one using the main mall and this was when the market began to close because you couldn’t park anywhere near there.” Molinaro later explained that this was the type of ill-planned urban growth that forced the city further into depression.
This type of urban renewal, Molinaro postulated, was seen in many cities in the Hudson Valley and they all suffered economically. He later pointed out that many cities, such as Beacon, were able to quickly recover and redevelop. Poughkeepsie was not as successful in restoring the economy because elected officials avoided addressing urgent economic issues. Molinaro stated, “For certain established budgets they overestimated revenue and underestimated expenditures. Over the course of time they depleted all our city’s savings…and from 2007 forward, they eroded the cash flow. They did not want to take a hard look at the fiscal condition.”
In response to the situation, Rolison has entered the city into a number of agreements and programs to allow for more time to pay off debts in order to ensure workers get paid on time. This, Rolison claims, is the city’s number one priority. Despite mounting troubles on the issue, Rolison remains optimistic about completing the county and school district payments, as well as payment to the pension fund, in a timely manner. A Strategic Fiscal Improvement Plan is also being developed to help the city plan for long-term financial improvement, looking beyond the scope of the immediate debt to ensure that Poughkeepsie isn’t put into a similar situation in the future. “We will do our very best to make sure people get paid in a timely manner,” Rolison prompted. “It all depends on cash flow.”