You could argue Niagara Falls needs economic development more than any place else in Western New York.

Heavy industry shut down decades ago, taking with it half of the city’s peak population.

Many who remain live below the poverty line, and unemployment is the highest in the state.

To make things worse, the downtown tourism scene has only recently showed tangible progress.

That’s why Niagara Falls’ latest move has some scratching – and shaking – their heads.

City lawmakers plan to cut out the heart of their economic development department and have told the state agency tasked with revitalizing the Falls to take a hike.

Why? Because the city is gripped with a budget crisis created by a reliance on the Seneca Niagara Casino, and the alternative is an 8 percent tax hike and layoffs, lawmakers say.

Others are calling the move an attempt to sabotage developments made by Dyster and the USA Niagara leadership – in other words, the type of political power play Niagara Falls has long been infamous for.

“It’s almost as though you’ve got a coordinated policy to try to prevent the future economic revitalization of this city,” said Mayor Paul A. Dyster, who opposes the cuts made by the city council.

“We managed to keep our major projects moving forward during the recession, despite all the difficulties there, and they decide, ‘Well, let’s gut the department of planning and economic development.’ Well, why would you do that?”

At best, the move is an example of the cash-strapped city cutting off its nose to spite its face, the mayor says.

At worst, it’s the latest example of the type of political infighting that has hobbled tourism development around the region’s natural wonder for a half-century.

The dilemma comes at a particularly bad time, officials say.

City lawmakers plan to strip more than $3 million from the state’s USA Niagara Development Corp. just as the city pleads its case for increased tourism funding from the state.

“I’m trying to signal to Albany that we have not all gone crazy here,” Dyster said. “We need Albany’s help.”

City lawmakers counter that Albany hasn’t been that helpful to the city anyway, at least as of late.

The state is locked in a dispute with the Seneca Nation of Indians, leaving the city without $60 million in casino profits and creating a “disaster” budget situation.

“The state has hung us out to dry, the Senecas have hung us out to dry, and what the hell are we supposed do?” asked Councilwoman Kristen M. Grandinetti. “It really broke heart to do this [to USA Niagara], it really did.”

Other lawmakers aren’t brokenhearted about the cuts – they’re glad to cut the state loose.

“It seems like they dictate to us what we’re supposed to do or what we should do … it’s like they’re running the city,” said Councilman Glenn A. Choolokian. “No, we’re the city.”

Council Chairman Sam F. Fruscione said the development agency simply hasn’t produced enough results for the $3 million investment the city has made each year for a decade.

“Have they generated $33 million in property tax revenues in development?” Fruscione asked. “The answer is no.”

Dyster and many other officials are dumbfounded at that logic, pointing to more than two dozen projects in the downtown core.

Both sides note that the $3 million the city pays each year to USA Niagara actually is state aid given from Albany.

Not counting those funds, Niagara Falls taxpayers have invested just $4 million out of the $80 million in downtown projects, officials said – a whopping investment return ratio.

For the first time in decades, they say, successful developers who long stayed away from the city – Mark Hamister and Carl P. Paladino are two – are looking to invest.

For further proof, officials point to Old Falls Street, the new tourist strip that includes a $20 million conference center.

Those projects gave way to the $30 million Culinary Institute Niagara Falls, which opened its restaurants and retail store earlier this year.

All of those projects, officials point out, were built by USA Niagara and funded in part with the city’s yearly contribution of $3 million, which itself actually comes from state aid.

The cuts aren’t just aimed at the state, though. Many come at the expense of the city’s own development team.

Lawmakers plan for the city’s economic development department – which once included six staffers – to be reduced to two.

If the cuts hold up, the city won’t have an economic development director or a business development director positions that were either vacant or previously cut by the council.

Its current point person for developers, as well as its environmental specialist, will also be shown the door.

Fruscione said two current staffers would be able to pick up the respwonsibilities, while Choolokian suggested there was some room for compromise.

“Things are at the point right now where we have to get through this budget crisis, and then after January we’ll see if there’s things we can do,” he said.

Chief planner Thomas DeSantis said the cuts could hobble Niagara Falls’ best potential asset – its tourism.

It could also leave the city without the muscle to reach out to good developers and protect itself from bad ones, he said.

“Not long ago, I can remember developers coming and promising lots of things and we were disappointed,” said DeSantis, who has worked in city government for two decades.

“I don’t think we want to relive the mistakes of past developers coming in and running roughshod over us.”

Dyster acknowledges the council has tough decisions to make, but he says these particular cuts are part of a long history of shortsighted decisions the city must overcome.

“Whenever we get something positive moving in a good direction for any period of time, it always seems as though somehow we trip over own feet,” he said.

He added, “This is like, there’s a hard winter and the stores are running low, and you decide you’re going to eat the seed corn you would plant next spring. And I think that’s the wrong road.”