Albany

Two days ahead of the holiday, Gov. Andrew Cuomo sent the City of Albany a particularly welcome budgetary Valentine: $12.5 million that Mayor Kathy Sheehan will use to plug a yawning deficit.

"This is a great step forward," Sheehan said Thursday. "I think this is a recognition by the governor ... that we're being fiscally responsible."

The mayor, like Cuomo a Democrat, had warned last fall of "devastating" cuts to municipal services if the revenue couldn't be secured. Raising the money through tax increases alone would have required an estimated 22 percent increase in the city's $56.8 million property tax levy.

Cuomo will include a request for the additional funding in the 30-day amendments to his executive budget proposal, changes that are due to be submitted Friday. The budget plan must be negotiated with the Legislature before the start of the new fiscal year on April 1.

As has been the case in several similar aid infusions to New York's capital city in recent years, the aid will come in the form of a "spin-up" of the state's annual Payment in Lieu of Taxes (PILOT), an annual sum intended to cover the Empire State Plaza's absence from the local tax rolls.

Albany's most recent spin-up from the state was $7.8 million in 2013 — Mayor Jerry Jennings' final year in office — added to the executive budget proposal in Cuomo's February amendments.

While the new funding, if approved, will keep the wolf from the door for another year, Sheehan had been hoping to see an annual funding stream that would allow the city to craft "a realistic budget and a more permanent solution" to create stability for everyone involved — local officials, taxpayers, developers and even bond rating agencies.

"I'm starting to plan for 2017, and it's a fire drill all over again," Sheehan said.

A Cuomo administration official said the state anticipates future revenue to help the city balance its budget will be derived in large part from private development on the east side of the Harriman State Office Building Campus.

The state Office of General Services, which has been overseeing demolition and improvements on that tract, expects to put out a request for proposals this spring. Though the land would remain state-owned, the chosen developer would be required to reach a PILOT agreement with the city.

Sheehan does not expect a sizeable enough PILOT from that effort to be in place by next year. "I know that these things take time," she said.

In unveiling her budget last fall, Sheehan branded the longed-for $12.5 million as "Capital City Funding," a recurring revenue stream from the state tied to the value of its vast tax-exempt landholdings in Albany, chiefly the Harriman campus.

Albany receives far less per capita in state aid than other upstate cities with similar social and economic problems, city officials have argued. The imbalance, combined with the state's more than $3.5 billion in tax-exempt land, places a disproportionate burden on property taxpayers and an unsustainable way to fund city services.

Sheehan noted the city opened its books last year to the Cuomo-created Financial Restructuring Board, a move that netted $5 million in one-time aid.

The mayor said the city was nailing down "every possible efficiency we can gain by working with other municipalities," including a plan to centralize 911 dispatching with Albany County. Talks are occurring that could expand the effort to Rensselaer County.

"But it's not just flipping a switch," Sheehan said. "We've got work to do."

Jordan Carleo-Evangelist contributed • cseiler@timesunion.com • 518-454-5619 • @CaseySeiler