1.7 Financial Capacity and Control

The City of Buffalo is in a long-term fiscal crisis brought on by a structural imbalance between available sources of revenue and spending on municipal services and capital investment. The crisis had been deepening for many years until July 2003 when the State Legislature passed the Buffalo Fiscal Stability Authority Act, which placed the operations of the City under supervision of a State-appointed control board. 

Like most city governments, Buffalo receives revenue from a variety of sources and could not survive on the proceeds of the local property tax levy alone. For example, in fiscal year 2002-03, only 29 percent of City revenues came from the local property tax – a small proportion but still above the national average municipal share of 27 percent. Proceeds of the Erie County sales tax accounted for 21 percent of total revenue. New York State provided 45 percent. Two percent came from the federal government and three percent from other sources. 

The structural limits on local revenue include a property tax base that is, at best, stagnant, and excludes many from an obligation to pay such taxes. The property tax levy declined from $154 million in 1996-97 to $131 million in 2001-02 – a loss of $23 million in revenue – simply because property in the city is assessed at a lower value than before. In 2002-03, the levy climbed slightly to $131.8 million, but far from enough to close municipal operating deficits. Meanwhile, nearly 40 percent of city property is owned by organizations or individuals who are exempt from local property taxes. Of residential taxpayers who do pay tax only 35 percent, or 29,555. pay more than $1,000 a year 

The result of this shrinkage in revenue, in the face of rising costs for salaries, health care and pensions, and in the absence of additional help from higher levels of government, has been severe cuts in City operations, elimination and downsizing of programs, transfer of operations to other units of government, and layoff of municipal personnel. Shrinking revenues and higher costs have also threatened implementation of Buffalo’s capital reinvestment plans. Buffalo’s 2003-2007 capital improvement program includes 46 projects with a total cost of nearly $162 million. Even though more than $82 million is reimbursable by federal and State governments, Buffalo must still generate the local shares for these projects. 

Work is ongoing to improve capital planning, instigated by revisions to the City Charter approved by voters in 1999. These revisions mandated that capital budgeting be integrated into a new strategic planning function, supervised by a Citizens Planning Council and supported by the Mayor’s Office of Strategic Planning (OSP). Together, they review proposed projects and recommend to the Common Council a four year program and budget. In parallel, the City Comptroller is required to establish independently the amount of new debt the City can prudently incur. Capital projects, as before, are managed by the Buffalo Urban Renewal Agency (BURA). Implementation of the Charter revisions has brought a new level of discipline to the process, but these efficiencies have not closed the City’s structural budget deficit.

Enabling legislation for the Buffalo Fiscal Stability Authority gives the control board the difficult task of overseeing restoration of a balanced budget in ways “which preserve essential services to city residents while also ensuring that taxes remain affordable.” Failing to meet these divergent goals, the legislation states, will “jeopardize the city’s long-term fiscal health and impede economic growth for the city, the region and the state.” 

The mandate of the nine-member control board encompasses the City, all of its agencies, as well as the Buffalo Public Schools. The City is required to submit four-year plans and a one-year budget each May for the control board’s approval prior to the start of the City’s fiscal year on July 1. The board has authority to oversee all collective bargaining agreements, ensure that all actions taken are within approved budgets, close operating deficits, and to borrow on the City’s behalf. 

Creation of the control board is a welcome sign of the State’s recognition of the city’s grave financial situation. Over time, the board will contribute to the amelioration of the city’s problems. So will implementation of this Comprehensive Plan. However, it is already clear that additional support from County, State and federal governments will be needed to mend the budget, deliver this plan, and turn Buffalo around.