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NIAGARA FALLS – Mounting tensions between Mayor Paul A. Dyster and the City Council boiled over Tuesday night as the two sides argued about how to solve a fiscal crisis that threatens to bankrupt the city by summer.

After weeks of indirect criticism, city leaders had it out at the Council’s bimonthly work session, fighting over cultural arts funding, city spending and the dispute with the Seneca Nation of Indians.

The session actually began and ended amicably, with both sides promising to work together in the coming months to solve the city’s many financial issues.

But for most of the meeting, residents were treated to a rare public airing of grievances by the normally stoic Dyster and city lawmakers who have seemed emboldened since last year’s grueling budget process.

The hottest topic was the Niagara Arts and Cultural Center, which received $30,000 in city funds in the 2013 budget before the Council unexpectedly slashed the funding.

Dyster has said his ties to the organization made the cultural hub an easy political target, a charge the Council denies, and one of Buffalo’s top philanthropic organizations offered to provide $15,000 for the organization if the city contributes the other half.

“We’re here to plead with you that you take us up on our offer,” Robert D. Gioia, president of the John R. Oishei Foundation, told the Council Tuesday. “We have invested, we have skin in the game with you folks” because of $10 million in Niagara Falls charitable funding given by the foundation in recent years.

Members of the three-man Council majority, who engineered the cuts, said they appreciated the offer. “But we’re going in a different direction,” Council Chairman Glenn A. Choolokian said, declining the assistance.

“We have bills to pay, and we will be responsible at the end of the day, not you, Mr. Gioia, with all due respect,” said Councilman Sam F. Fruscione.

The Council majority has been slashing budgeted items such as the arts funding in an attempt to store enough money in a contingency account so that the city can make a $5 million debt payment later in the year.

Dyster plans on making that payment with Seneca Niagara Casino funds that he believes will be freed up after the dispute between the Senecas and state is settled later in the year – money the city does not have in its coffers now and which the Council doubts it will ever get.

“We’re trying to survive here, to keep this city alive,” said Councilman Robert Anderson Jr. “We don’t have it, and it looks like we’re not going to get it.”

That exchange set the stage for a full-blown debate on the city’s fiscal strategy for the coming year.

Dyster defended the practice of budgeting the casino funds, saying he is confident – as a third-party beneficiary to New York State’s case against the Senecas – that the state will win the arbitration and the casino funds will flow.

“Our expectation is that the State of New York will be vindicated in that arbitration,” the mayor said. “We’re tracking that very closely.”

He also said the Council had a chance during the budget process to downsize city government – Dyster originally proposed layoffs and leaving positions vacant after retirements – but chose to make temporary fixes.

He also has questioned the legality of the Council disregarding an approved city budget document, saying it creates disarray in all facets of city government and makes the city an unattractive business partner.

Controller Maria C. Brown confirmed that the city will be in serious trouble come June – when a $5 million debt payment on a state-mandated courthouse is due – if it does not receive the casino funds before then.

Brown said the city’s cash flow situation is more dire than last year, when it briefly considered dipping into a New York Power Authority improvement fund to stave off layoffs.

The Council instead cut financial ties with the state’s Niagara Falls development agency.

The state and the Seneca Nation are expected to complete arbitration this summer. The Nation has withheld more than $500 million in revenues from Niagara Falls and other municipalities because it feels the state violated its gambling exclusivity agreement with racetrack casinos.

Councilman Charles Walker said city leaders need to find a remedy in case the casino revenues never come – and to find it soon.

“We can’t do this separately,” Walker said of the Council and the mayor. “We have to do this thing together. We should be talking about that now, and not waiting until June to figure this out.”

email: cspecht@buffnews.com