TROY — Troy

The critical State Comptroller's Office audit that slammed the city's budgeting and financial operations made it clear to city officials that they have a fiscal mess that won't be easily corrected.

Budgeting poorly, compiling inadequate financial reports, draining financial reserves to pay for operations and having insufficient funds for capital projects are to blame for the city's bleak financial condition, auditors wrote in a report issued Wednesday.

"City officials were repeatedly cautioned by my office about adopting unbalanced and unrealistic budgets," State Comptroller Thomas P. DiNapoli said.

Troy Audit by MikeGoodwinTU

"Troy's chronic operating deficits and dangerously low levels of rainy day funds are due to the continued reliance on reserves and non-recurring revenues as a means to finance routine expenditures," he said.

The state has warned the city several times that its lack of fiscal planning has brought it too close to a state control board resuming oversight of city finances. The state intervened in the city's fiscal matters in the late 1990s when Troy Municipal Assistance Corp. was created to borrow money to close city deficits.

"We're in a tough spot," Mayor Patrick Madden, who took office on Jan. 1, said in an interview Wednesday.

From 2012 through 2014, the city took $6.4 million from the its water fund to pay for the general fund, the part of the city's budget that is used for daily operating expenses, the audit found. The practice is frowned on by state auditors and municipal spending experts. "Without these subsidies, the general fund would have experienced operating deficits during each of the last fiscal years totaling more than $8.3 million," the audit states.

The audit covers the period from Jan. 1, 2012 to May 31, 2015. The state examined the final budget drafted by Mayor Harry Tutunjian's administration and the first three budgets drafted by Mayor Lou Rosamilia's administration. Tutujian is a Republican and Rosamilia is a Democrat.

The Times Union reported in January that the draft audit criticized the city's budgeting and financial operations.

City officials met with state auditors in January to discuss the report's findings.

Troy, however, can pull itself out of this mess, Madden insisted. To trigger state intervention, the city would have to run 1 percent deficits across its general, water and sewer funds, which Madden, a Democrat, said he did not expect to happen.

"I intend to repair the problems identified by the auditors without assessing or fixing blame," Madden wrote in a response attached to the audit.

"The goals of my administration will be to remedy each shortcoming noted in the audit, and establish safeguards and procedures to ensure the future integrity of city financial operations," Madden wrote.

The city is searching for a comptroller and needs a budget director as well, the mayor said. The city will have to deal with issues that have developed over years and cannot be fixed quickly, the mayor said.

The city will not need a mid-year tax hike, Madden told the Times Union, and will not need to cut staff to deal with budget problems.

The City Council, which must issues its own response to the audit, wants to hire an accounting firm to help draft its reply and then advise lawmakers on the city's financial future.

City Council President Carmella Mantello said the audit "is an indictment of fiscal mismanagement and hidden deficits during these years."

"This type of fiscal mismanagement must be brought to an end in the city of Troy," said Mantello, who leads the Council's six-member Republican majority.

Councilwoman Lynn Kopka, leader of the three-member Democratic minority caucus, said, "Let's hope we can address the issues and get our fiscal house in order."

kcrowe@timesunion.com • 518-454-5084 • @KennethCrowe