Niagara Gazette

February 26, 2013

City officials bracing for potential fiscal crunch

By Justin Sondel
Niagara Gazette

Niagara Gazette — City lawmakers vowed earlier this month to get together on a more regular basis to discuss the city's financial future. 

So far, no meetings have been scheduled.

During the Feb. 19 council meeting, lawmakers and Mayor Paul Dyster agreed on the need to formulate a plan for dealing with the city's ongoing cash crunch, which is expected reach a breaking point this summer if the city does not receive roughly $60 million being withheld due to the ongoing dispute gaming revenue dispute between the Seneca Nation of Indians and New York state.

Dyster said he and members of his administration will monitor the cash flow situation as the year progresses — as they do consistently — and deal with fiscal issues as they arise.

"That's ongoing," he said. "It never stops."

Dyster said it is not helpful to simplify any potential budget issues to the stoppage of casino funds.

"There are issues beyond the casino revenues that we have to address to get our long-term revenues and long-term expenses in line," Dyster said.

He and other city officials will closely monitor and react to the many possible situations in store for this fiscal year, Dyster said.

"As things come up on the horizon that need to be addressed in a certain time frame I will make proposals to deal with those issues, if and when they come up," the mayor said.

City officials may not be on the same page when it comes to how best to deal with the situation, but they seem to agree on the need for some type of contingency plan outlining what is to be done if the casino money does not come through by mid-year as anticipated.

Dyster and other state officials have maintained the state will get the money it is owed and the binding arbitration process that will bring an end to the dispute will conclude in the first half of 2013.

Dyster said the city has several options to fall back on if the money is delayed for any reason.

The city could take a deal offered by the New York Power Authority in November that would convert 44 years worth of payments negotiated in the 2007 Niagara Power Project relicensing agreement into one lump sum.

The council turned down the original offer which would have seen the city receive $13.4 million now instead of the $37.4 million the city would see over the course of the agreement.

That deal also would have included a clause allowing the city to repay the money and return to the original agreement, which Dyster said was the plan all along.

That deal is still available with wiggle room to negotiate terms, he said.

Another option would be to short-term borrow to hold the city over until it receives money from the result of the arbitration or — as Dyster has said he prefers — an out-of-court settlement.

Some members of the city council have aired concerns about whether the dispute — three years in the making — will bring the city the money it needs in time to avoid cuts to city services and possible layoffs. And those members have questioned whether the city will ever see the money, noting the arbitration panel could side with the Senecas.

Council Chairman Glenn Choolokian said he does not see the NYPA deal as an option without a guarantee the city will see the money from the gaming compact. That deal would only work if the authority was willing to give the city the entire $37 million in a lump sum, he said.

"That would be the ideal situation," he said.

Choolokian said Dyster has not yet approached the council with specific plans for financial meetings, but he is confident the two sides will get together soon to discuss the cash crunch and next year's budget.

"It's going to be tricky this year," he said. "It's going to be worse than last year."

During last week's council meeting, Councilman Charles Walker called for both the council and the mayor to come together to work on this issue.

He said he will propose a five-person panel that would be responsible for financial matters at the council's next meeting on Monday. His proposed panel would include a council member and one representative each from Dyster's administration, the city controller's office, the law department and public safety.

The panel would audit each department to look for inefficiencies and work on a plan for what to do if the casino money does not arrive in time to avoid calamity, Walker said.

"We need to come to the table and collectively discuss all these things," Walker said.

City Controller Maria Brown said assertions made in the press that the $5.5 million in bond debt will cause the cash crunch this summer are misleading. The city has bond debt payments throughout the year and if the withheld casino funds are not delivered on time city service cuts and layoffs will come before the city defaults on a bond payment.

"I'm going to pay the bond before anything else," Brown said.

She said any spending freeze put in place cannot make up the $7 million gap in the budget caused by the anticipated casino founds counted as revenues set for bond debt repayment and to repay the special projects fund balance.

"The structural deficit that sits right now in the 2013 budget is beyond a spending freeze," Brown said. "You don't want to step over dollars to pick up nickels."

The two options put forth by Dyster are not ideal for the city either. The NYPA deal puts the city in risk of losing out in the long run if the casino money never comes and short-term borrowing pushes more burden onto the taxpayer in the form of interest payments, Brown said.

And with the city's bond rating recently downgraded by the bond rating agency Moody's any borrowing the city does will come with higher interest rates.

"Why should interest costs be pushed onto the backs of the taxpayers?" Brown said.

Brown said it is important for Dyster, the council members and herself to get together and discuss the city's financial future and to map out plans for the future.

"I would hope that we can all sit at the table to discuss this," she said.

Even if the money comes all city departments could be run more efficiently. Before the gaming compact brought the casino revenues the city accomplished what it needed to with much less money, Brown said.

"I think people have gotten so conditioned to the casino money that they forgot what it's like to not have that money," she said. "Back in the day we got it done."