Aid and Incentives for Municipalities (AIM)

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The 2008-09 Executive Budget contains $945 million for the Aid and Incentives for Municipalities (AIM) program, which provides $920 million in direct State aid to cities, towns and villages. Additionally, a $25 million Local Government Efficiency Grant initiative is also included to encourage cost savings through consolidation and shared services among all classes of local government.

AIM funding in 2008-09 features the second installment of a four-year, $200 million commitment to target additional State aid primarily to fiscally distressed municipalities. To fund this commitment, AIM increases totaling $50 million are authorized in 2008-09. In addition, $6 million in new funding will support supplemental increases for distressed municipalities that receive significantly less aid on a per capita basis than their peers. These increases are tied to enhanced accountability requirements that encourage local fiscal improvement.

The recommended $25 million Local Government Efficiency Grant initiative redesigns the current Shared Municipal Services Incentive program based on recommendations of the Governor’s Commission on Local Government Efficiency and Competitiveness to more effectively encourage consolidation and shared services among local governments.

Finally, the Executive Budget includes a partial, $164 million restoration in AIM funding for the City of New York – a $144 million increase over the 2007-08 aid payment, but half of the $328 million amount originally scheduled for 2008-09. The Executive Budget Financial Plan assumes a full AIM restoration to $328 million in 2009-10 and each year thereafter.

Key features of the 2008-09 AIM program include:

The continuation of a four-year, $200 million commitment of annual increases in State aid targeted to distressed municipalities: AIM increases ranging from 3 to 9 percent will again be provided to municipalities based on their level of fiscal distress. Fiscal distress is measured using indicators that include:

Full valuation of taxable real property per capita less than 50 percent of the statewide average.
More than 60 percent of the Constitutional property tax limit exhausted.
Population loss greater than 10 percent since 1970.
Poverty rate greater than 150 percent of the statewide average.

Over the four-year period from 2007-08 to 2010-11, annual increases are awarded to eligible cities, large towns and large villages with per capita taxable property wealth below the statewide average as follows:

9 percent if all four distress indicators are met.
7 percent if three distress indicators are met.
5 percent if one or two distress indicators are met.
4.5 percent maximum additional increase if these municipalities receive significantly less aid than their peers on a per capita basis.

A 5 percent increase in aid is provided to small towns (population less than 15,000) and small villages (population less than 10,000) that meet at least one of the distress criteria and have per capita taxable property wealth below the statewide average.

Municipalities that do not meet the above criteria receive a 3 percent inflationary increase.

Accountability requirements: Distressed municipalities that receive over $100,000 in additional aid are required to use the AIM funding to: (i) minimize or reduce the real property tax burden; (ii) invest in economic development or infrastructure to achieve economic revitalization and generate real property tax base growth; or (iii) support investments in technology or other reengineering initiatives that permanently minimize or reduce operating expenses.

In addition, these municipalities are again required to submit a comprehensive fiscal performance plan (PDF) to the Director of the Budget and the Office of the State Comptroller within 60 days of their adopted budget. The plans include:

A multiyear financial plan;
A fiscal improvement plan that includes key fiscal performance goals and action plans necessary to achieve long term fiscal stability; and
A fiscal accountability report that describes accomplishments toward achieving efficiency and improvements, and that details how AIM funding has been spent.

The Office of the State Comptroller is authorized to perform compliance reviews of the accountability requirements, and may recommend the withholding of AIM funding to municipalities that do not comply.

As an accountability measure, cities with additional aid under $100,000 that receive inflationary increases and large villages that meet all four fiscal distress indicators are required to prepare multiyear financial plans.

The 2008-09 Executive Budget expands local reporting requirements to further improve local fiscal management practices and transparency. All municipalities will be required to post financial reports on their websites, including their most recent budget, independent audit, and multiyear financial plan. Municipalities that meet AIM program criteria for fiscal distress will be required to undergo an annual independent audit. Finally, the Office of the State Comptroller is directed to collect and report new fiscal performance data on local governments to assess comparative efficiency, identify opportunities to consolidate or share services, and make informed projections for financial plans required under the AIM program.

Local Government Efficiency Grant Program: The 2008-09 Executive Budget creates a new Local Government Efficiency Grant (LGEG) program based on the recommendations of the Commission on Local Government Efficiency and Competitiveness. This new program, funded at $25 million, restructures the current Shared Municipal Services Incentive program with enhanced focus on consolidation and major service sharing arrangements that will save taxpayer dollars. The program features new 21st Century Demonstration Projects that will support countywide or regional service models in areas like education, highway maintenance, policing and smart growth planning. LGEG also places greater emphasis on service and governmental consolidations, program evaluation, technical assistance and new State agency efforts to achieve local efficiencies.

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