Falls’ finances in shambles as auditors find problems

By Mike Hudson, The Niagara Falls Reporter

The Niagara Falls Financial Advisory Panel unveiled its long awaited report at this week’s city Council meeting, a scathing impeachment of the present administration that would be familiar to any regular reader of this newspaper.

Despite the fact that the city is the most highly taxed municipality in the state, according to the New York State Financial Restructuring Board for Local Governments, and despite the mainline injection of nearly $200 million as the local share of slot machine revenue from the Seneca Niagara Casino, the city is for all intents and purposes broke.

The panel’s report found plenty of blame to go around, all of it centering on City Hall.

“In spite of the availability of adequate formal budget reporting, the members of the (panel) were alarmed by the absence of ‘a sense of urgency’ displayed by the mayor and city council regarding the financial weaknesses that are inherent in the development of the city budget,” the report stated.

In essence, the city is running its day to day operations on money it has yet to receive. In the 2015 and 2016 city budgets presented by Niagara Falls Mayor Paul Dyster, a total of nearly $25 million in casino revenue has been allocated just to keep employees paychecks from bouncing.

As City Comptroller Maria Brown has repeatedly pointed out, the practice cannot continue for long. The panel’s report stated that the available pool of casino revenue will have shrunk from $20 million a year to $2 million in 2018.

The cavalier practice provides a “principal illustration” of the city’s “lack of fiscal discipline,” the report states.

And this does not even take into account the fact that Revenue from the casino has fallen steadily, from $21.6 million in 2012 to $20.2 million in 2013 and $19 million last year. Projections show that, this year, just $18 million will be realized and things look even worse for 2016.

“There was ample time for the mayor and members of council to come together to identify any combination of revenue enhancements and cost reductions for (2016) that would constitute an acceptable fiscal ‘correction’,” the report read. “(The panel) was dismayed to learn that no such discussions occurred.”

Former Niagara Falls School District Superintendent Carmen A. Granto served as chairman of the panel and Lawrence H. Cook II, a senior program officer with the Oishei Foundation, was its vice chairman. The six member panel also included Falls School Board member Russ Petrozzi and former city councilman Frank Soda.

They questioned the “political will” of the mayor and the city Council to address casino fund usage, property reassessment, tax equalization and asking the state’s Financial Restructuring Board for Local Governments to come in and take over the city’s finances.

Among the city panel’s recommendations;

  • That the position of budget director, eliminated in the 1990s, be reinstated. The panel recommended that the budget director’s job be given “an inherent degree of independence” under law to protect against political meddling from the mayor’s office. The panel had previously found that a “politically acceptable” property tax rate was determined before even considering how much was actually needed to run the city.
  • Tax equalization and a citywide property reassessment were both on the panel’s “to do” list. The equalization of tax rates between business and residential properties is an idea that has long been discussed but never acted upon completely. Currently, business property owners pay somewhat more than residential property owners for similarly valued real estate. A reassessment would theoretically increase revenue by raising the tax on properties to 100 percent of their value, rather than the 60-80 percent that is collected now. But since the value of many if not most properties in the city is declining rather than increasing, it is uncertain what the real effect would be.
  • Raising taxes to the maximum limit allowed under state law would give the city $31 million next year, instead of the city’s roughly $28 million that is projected, the panel noted. This proposal would increase Niagara Falls lead over all other cities in the state as the highest taxed city in New York and might backfire since the more taxes are raised the more people move out or make other selections as to where to move into.
  • The city has already gone ahead with a recommendation from the panel to ask the NYS Financial Restructuring Board for Local Governments to come in and provide some adult supervision over the city’s budget making process. The board is authorized to offer grants and loans of up to $5 million through the Local Government Performance and Efficiency Program to targeted municipalities willing to undertake certain recommendations. If the municipality agrees to accept the money then it must undertake the board’s recommendations and becomes contractually obligated to fulfill those terms.

The local panel’s bleak assessment of city finances is in line with an audit conducted in 2013 by state Comptroller Thomas DiNapoli and a second audit, finished in May of this year and commissioned by Dyster himself. Both documents highlighted out of control spending that led the most highly taxed city in the state, one with the added advantage of nearly $200 million in casino revenue unavailable to most other municipalities, to the very brink of bankruptcy.

With the exception of raising taxes, the report is very much in line with the ongoing analysis that has appeared in one form or another in most editions of the Niagara Falls Reporter published over the past eight years.

You can’t say we didn’t warn you. With no significant opposition on his new look city Council, nothing will prevent the mayor from raising taxes, cutting services and turning even more authority for city operations over to the state.

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