Malfeasance by a former Williamsport bus manager and finance director is pinching the finances of Williamsport, which is facing a $3 million to $4.6 million budget deficit next year.

Williamsport has had to tap into its emergency and reserves fund to cover the bulk of the repayment of $1.4 million to the Federal Transit Administration.

The repayment — made through city funds — was required because a former city finance director and former general manager of River Valley Transit before it was a separate authority, committed charges of felony theft by failure to make required disposition of funds and tampering with public records. That former city administrator, William E. Nichols Jr., oversaw and directed the misappropriation of more than $500,000 in state and federal transit grants used for non-transit projects. He was sentenced on May 5 in Dauphin County Court to one year probation.

When the city constructed the emergency and reserves fund it was built to accrue tax revenue over and above the expected revenue, Councilwoman Liz Miele said in a recent meeting with officials from Public Financial Management (PFM) and the state Department of Community and Economic Development.

That means, while Miele and council were not pleased it was drawn down, it was money that was added by additional tax revenue.

“The money was not a draw down on reserves as much as it was a draw down on the cash balance,” Miele said.

Gordon Mann, PFM managing director, agreed.

He said the firm knew why it was taken out.

“It would be better if you had $1.4 million and you fixed five parks, lowered the real estate tax or did 10 other things,” Mann said.

“What the city is essentially doing is taking revenue and saying ‘this was better than I thought I am going to put it in reserves until I need it and now I need it.'” “That is sound financial management, right?” “It would be better if you didn’t have to,” he said

Mann said what concerned him is the number above that – the deficit that could be $4.6 million.

“This is the selling the car to pay my electric bill,” he said. “That is what makes me nervous because once your car is gone, if you sell your car to buy your groceries you have no car and you still get hungry.”

Miele agreed with that analogy and added that none of this is saying the city financial situation is rosy right now. But she remarked – to Mann’s point – the city took a portion of the $25.4 million in American Rescue Plan Act funding and added it to its parks facilities.

However, these facilities will need to be maintained.

“That is one of the items that makes me nervous,” Miele said.

“In this less than rosy budget picture … we are not budgeting funds to eventually replace any equipment at those parks facilities.”

“So, we have increased the number of expenditures that we see in the city. While we see a decreasing budgetary basis to pay for them.”

Mann said the city is spending about $700,000 on capital projects such roads, fire vehicles, bridges, and fixing the roofs.

“One, that is good, and two, that is not enough,” he said.

The cost to maintain city government is not $700,000, he said.

Thirdly, he said, PFM doesn’t want the city to go backwards and not pretend that roads never break down or vehicles never need to be fixed.

When the city needs to look at its capital expense needs it is going to want to know what to do with the other city hall building, and the police station, Mann said.

“This is where this isn’t an accounting exercise,” he said. “Nobody’s here because of what your balance statement looks like,” he said.

“We need to make sure that it’s balanced and you are able to fund the type of things that you need.”

PFM is going to present those big ticket recommendations in late September.