SOLVAY, NY — The village of Solvay mismanaged the finances of the municipality’s electrical department, dropping its cash balance from $4.1 million to $1 million over four years, according to one person. review by the State Comptroller’s Office.
A report released by Comptroller Thomas DiNapoli’s office on Friday said a review of the Village books from 2016-17 to 2020-21 showed:
- Village electrical department officials failed to keep up-to-date records or provide adequate financial reports to the village board of trustees.
- The board of directors and village officials failed to take action to ensure that revenues from the village electricity fund matched expenditures.
- Officials did not ensure that annual payments from the Electricity Fund to the village general fund totaling about $1 million were justified and subsidized.
In addition, the report said officials did not monitor the village’s general fund budget during the 2021-22 period. As a result, total expenditures were $7.3 million, an increase of $1.3 million (22%) over the original budget appropriations of $6 million for this year. , say the auditors.
Solvay is one of more than 30 villages in New York that operates its own electric division. The village buys wholesale electricity from the New York Energy Authority and the New York Municipal Electricity Authority and sells it to villagers and businesses at rates much lower than those paid by customers of private electric companies such as the national grid.
The village electricity department is overseen by a five-member committee that includes the village mayor and four members appointed by the mayor, subject to approval by the village council. According to the report, the committee is a subsidiary body that works for and with the pleasure of the village council.
The report stated that the total net assets of the Village Electricity Fund decreased by about 50%, from $18 million at the beginning of the 2016-2017 fiscal year to $8.9 million at the end of 2020-2021.
She said the decline occurred primarily because the Electricity Fund experienced annual losses ranging between $500,000 and $1.5 million during that period. At the same time, the electrical fund’s cash balance — the money left over after all costs are paid — dropped nearly 75%, from $4.1 million to $1 million, according to the report.
According to the village law, the electricity management committee is responsible for preparing and submitting the proposed annual budget of the electricity fund to the village council by March 31 of each year for review, according to the report. However, they have not historically done so, she said.
“During our audit period, the commission did not develop a proposed budget and the council did not approve a budget for the Electricity Fund,” the report said. Therefore, the officials did not have any information or records detailing the financial plan of the authority or the board of directors for each fiscal year, such as the proposed appropriations needed to carry out the activities of the Electricity Department and the proposed means of financing these activities.
The report said officials did not develop budgets for the Electricity Fund, so they were unable to monitor actual revenues and expenditures against the budgeted increase.
It said the lack of proper financial management caused cash flow problems for the electric department.
In August 2021, Mayor Derek Paechey signed and issued checks including three purchased energy payments totaling $1.6 million when the former Electricity Department treasurer was unavailable, according to the report. But she said the bank account did not have enough funds to cover the payments.
“This caused the account to have a temporary negative balance of approximately $17,000,” the report said. “While the bank allowed the checks to clear and the negative balance with deposits was corrected the next day, this illustrates the precarious cash position of the Electricity Fund and the need for the Board and Administrators to receive updated financial information to carefully monitor the Electricity Fund’s financing.”
The report said the Electricity Department has not conducted a price study since 2008. As a result, the base rates charged to customers have not increased in more than 14 years. She explained that during the same period, energy, labor, supplies, equipment and other costs increased, but the revenues from electricity sales were not enough to cover the increased expenses.
The auditors also questioned the payments made by the Electricity Department to the village’s general fund. They said the Electricity Fund paid the General Fund about $1 million annually, or roughly $5 million from 2016-2017 through fiscal years 2020-21 for rents and property taxes that the Electricity Department would have paid if it weren’t tax-exempt.
“While some of these payments were permissible, we question some of the components that make up those payments,” the auditors said. “Furthermore, given that the Electricity Fund has incurred annual losses in recent years and its cash position has deteriorated, we wonder whether the Fund will have sufficient resources to continue making these payments to the General Fund.”
In a letter to the Comptroller’s Office in response to the review, Baishi said the village “acknowledges that there are improvements that need to be made in terms of budget preparation and monitoring of the Electricity Fund’s financial position.”
In the letter, he said, “We are currently working on implementing several changes with regard to the Electricity Fund, including completing a price study.”
In a phone interview on Friday, Baishi said he’s been advocating the price study since 2016, when he was on the village board. He became mayor in 2018.
Beachy said the village has not raised electricity rates since 2009 to keep bills as low as possible for residents. He said the average electric bill for homeowners in the village is $30 to $40 per month, compared to bills of $85 to $100 for residents in other communities.
“Our rates are much lower than in most other communities,” he said. This is why there are not many homes for sale. People don’t want to leave.”
However, he said that after the rate study is complete, the village will likely ask the state public service commission for permission to raise rates by a small amount while keeping them well below rates in other communities.
In addition, he said the village is taking cost-cutting measures, looking to get better prices for vehicles and other equipment for the electric department and lower employee health insurance rates. It also hired accounting firm Dannible & McKee to help it better manage its electric and utility funds, he said.
As a result, he said, he expects the electricity fund’s cash balance to improve significantly over the next two years.
“We’re moving in a much more positive direction,” he said.
Rick Moriarty covers business news and consumer issues. Have a tip, comment or story idea? Contact him at any time: e-mail | Twitter | Facebook | 315-470-3148
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