Niagara Gazette

November 13, 2012

Power deal debated by city council, mayor

By Justin Sondel
Niagara Gazette

Niagara Gazette —

Members of the city council are wary about an offer from the New York Power Authority.

Council members peppered Mayor Paul Dyster with questions about the proposed deal which would accelerate funding from the 2005 relicensing settlement agreement between the power authority and Niagara Falls.

Dyster said there aren’t many clear answers to the questions that council members had, but that the specifics of the deal would become clear after further conversations with the power authority.

"The issues that council is raising are the same issues that we raised internally," the mayor said. "We're absolutely running down the same thought trail."

Dyster, Council Chairman Sam Fruscione and city lawyers will meet today to discuss the possibility of the city accepting the power authority money.

The power authority has passed a resolution which will allow for the city to take a lump sum payment of $13.45 million in lieu of the remaining 44 years of the city's annual host communities payment of $850,000. If the city were to keep the current agreement it would receive a total of $37.5 million over the remaining years of the deal.

The $13 million sum is the product of a complicated discount rate formula outlined in the agreement. 

Included in the resolution approved by power authority trustees on Friday is a notation that the city has requested to retain the option of repaying the funds and returning to the original agreement, which the authority agreed to honor.

"Authority staff is amenable to this and will incorporate it into the agreement between the city and the authority to effectuate the agreement," the resolution says.

A power authority spokesperson told the Gazette that it has started to draft specifics for the agreement but could give no details.

Fruscione said the council majority was not willing to accept the deal without knowing more. But he feels this is a bad deal for the city and that the New York Power Authority is taking advantage of the city's vulnerable situation, something that the state created.

"They do no favors for the city of Niagara Falls," Fruscione said. "The state should step up and say, 'look, we're just going to give you $37.4 million because we already overcharge you for utilities, we suck all of your electricity downstate and we sell the rest to New Jersey and Connecticut.' "

Fruscione said that he is not willing to take a lump sum payment that will ultimately cost the city approximately $22 million over the years.

"If they give us the whole wad up front, we'd have no problem accepting that and then we'll put our own strings attached to it on how it's going to be spent,"  he said.

Fruscione believes that he and members of the council will be able to cut between $4 and 5 million out of Dyster's proposed budget — which includes an 8.3 percent tax hike for homeowners, 20 layoffs and cuts in services — meaning that they would not have to take the power authority deal, he said.

"Our part has to be considered unless the state is willing to give us all of the money that is owed to us," Fruscione said.

The acceleration of funding has been described as bridge financing by Dyster and other officials, meant to hold the city over until there is an outcome in the gaming compact dispute between the Seneca Nation of Indians and New York state.

The Senecas have not made payments to New York since 2009 because, they assert, the state has violated the exclusivity clause in the gaming compact making the agreement void. In turn the state has not paid the host cities of Niagara Falls, Buffalo and Salamanca. The stoppage in casino revenue payments is a major factor in the city's current financial woes. Niagara Falls had been recieving around $18 million in casino revenues a year and is now owed over $60 million.

Dyster has repeatedly said that the city fully expects to be paid the money it is owed after the arbitration between the state and Senecas is settled.

"We're not involved in litigation, but there is ongoing arbitration in which the state is fighting from a position that vindicates our interests," Dyster said.

Once the city receives the payment from arbitration, which is expected to be settled in the first half of 2013, it will be able to repay the power authority and return to the original deal, Dyster said.

"If you agree to go ahead with the acceleration of revenue," Dyster said to the council, "we want to have the ability to go back to the other direction."