Outrages & Insights
Buffalo’s financial picture is cause for alarm
The city has been borrowing money and spending down reserves to cover costs—an unsustainable practice.
Jim Heaney is editor of Investigative Post, a nonprofit investigative reporting center based in Buffalo.
Byron Brown has a reputation as being a good financial manager. That may have been true earlier in his thirteen-year tenure as mayor, but, in recent years, he has brought the city to the edge of serious fiscal problems. City government, with Brown at the helm and the Common Council in tow, has burned through $107 million in reserves in the past eight years, half of it in the past two years alone. It’s been paying its bills since the first of the year in part by—get this—borrowing money from the Board of Education. Yes, it’s come to that.
City Hall faces a deficit of up to $27 million in the fiscal year that ended June 30 and is confronted with the prospect of having to borrow to balance the books or tap into $38 million reserved for emergencies that the City Charter says should not be used for balancing budgets.
Give Brown credit for managing the expense side of city government—perhaps too well when you consider spending on quality-of-life programs like parks and recreation is bare bones. And increased school aid? Forget it.
Where the mayor and the ever-compliant Common Council have gone wrong is on the revenue side. They have doggedly refused to raise property taxes, the largest source of revenue the city can access. That may be good politics on one level, but it has proven to be fiscally irresponsible. Add to that the city’s reliance on one-shots and revenue streams that haven’t panned out.
“They’re overestimating the revenue—selling all kinds of real estate, making all kinds of projections that don’t mirror what’s happened in the past,” Fillmore District Councilman David Franczyk tells Investigative Post. “The revenue coming in is much lower than [they’re] projecting.”
The city had grown used to the state bailing it out with annual increases of operating aid, but those days are over, thus the reliance on dipping into reserves. That’s what happens when you don’t fix a structural deficit.
Unfortunately, city officials have not learned from their mistakes. As documented by Geoff Kelly, my colleague at Investigative Post, the city proposes to balance its books the current budget year with revenues Kelly describes as “tentative, maybe, never going to happen.”
The Brown budget, for example, counts on $11 million in casino revenue tied up in a legal dispute with the Seneca Nation; $2 million from the sale of so-called zombie properties even though there are no laws on the books authorizing such sales; and $752,000 in ticket taxes that count on, among other things, a surcharge on Sabres tickets that the team’s lease on KeyBank Center specifically prohibits. The wishful thinking could come to as much as $21 million.
Not that the mayor and Council seem alarmed. How else can you explain their decision this spring to give themselves big pay raises? While Brown and Council members deserve the lion’s share of the blame for the city’s worsening financial plight, Buffalo’s fiscal control board bears some responsibility. It’s supposed to keep the city on the straight and narrow. It hasn’t.
The control board is costing the city about $1 million a year and what we’re getting for our money is a sleeping watchdog. The city has burned through $57 million in reserves in two years: what’s it going to take for the board to start doing its job?
Until it does, or the Council does its, the problems will continue. Don’t expect Brown to wake up; he’s the Alfred E. Newman [What, me worry?] of City Hall when it comes to this stuff.
Keep in mind that, all the talk of Buffalo’s renaissance notwithstanding, Buffalo remains a poor city. I’m not talking about its population, although that is certainly the case. Rather, its government is on the dole. State aid accounts for thirty-two percent of its operating revenue and eighty-six percent of its school district budget.
Add it all up and Albany is providing Buffalo with seventy percent of its operating funds, totalling just shy of $1 billion a year. We’re a ward of the state, and that won’t even begin to change until Brown and his yes men on the Council start making the hard decisions necessary to balance the city’s books.