To keep his promise not to raise taxes, Mayor Byron W. Brown is using millions in surpluses, state funds held by the state-appointed control board and money originally set aside to build a parking ramp.
Using those one-time revenue sources closes a budget gap created by too many expenses and not enough recurring revenue.
Brown’s financial management has won praise from his critics, and the city’s credit rating is the highest in its history, saving the city and the school district $62 million in interest costs in the last 16 months.
But in a year when Brown will seek election to a third term, the lack of significant new revenue has forced the administration to use funds that will be available just once to pay for expenses that will recur year after year.
To balance the 2013-14 budget, totaling $482.5 million, the city is relying on:
• $12 million from surpluses.
• $12 million in state aid that was being held by the control board.
• $9.6 million from the city’s parking operations, which includes money that had been set aside to construct a new ramp. That ramp is now deemed unnecessary because of the emergence of two projects that include privately developed parking structures: The Buffalo Sabres’ HarborCenter and Carl P. Paladino’s mixed-use development at Erie Basin Marina.
The city is also saving money by putting on hold hiring as older employees retire, equal to 50 positions in the Police, Fire and Public Works departments. The Brown administration insists the city’s ultimate year-over-year head count will be the same.
No one expected Brown to break his three-year pledge to freeze property taxes, and he appears to be using nearly every tool at his disposal to keep that pledge.
The tactic that most concerns City Comptroller Mark J.F. Schroeder is the continued use of fund balance, which rating agencies have been wary about.
“It’s a trend that this mayor, or the next mayor, is going to have to deal with,” Schroeder said. “You have to be able to have fund balance available, and you can’t deplete it.”
The city’s “A” rating from the three agencies – Moody’s, Standard & Poor’s and Fitch – has lowered borrowing costs for Buffalo.
And the city’s rainy day fund for disasters and unexpected revenue losses is intact, and there are other reserves to cover costs associated with settling union contracts and pending legal claims.
“We feel the city is very well-insulated against a rainy day, and there are a number of reserves in this budget to protect the health of the city fiscally and to protect our taxpayers and residents,” Brown said.
The city’s unassigned fund balance, or leftover surpluses not set aside for a specific purpose, had $12.2 million when the current budget year began; and though the city will use $12 million in 2013-14, it is projected to have $8.4 million as that fund is replenished from other sources in 2013-14.
In addition to the budget that takes effect July 1, the administration last week filed a four-year plan, which gives a preview of how Brown hopes the city’s finances will evolve.
Sometimes those hopes do not line up with reality.
Last year’s four-year plan predicted that the city would use only $3.9 million in surpluses to balance the budget in 2013-14. That prediction was off by $8 million.
The new four-year plan contains other questionable estimates, as well.
While the city has been praised for not budgeting for casino revenue that has not materialized, the plan shows the city will use $14 million in slot-machine revenue from the Seneca Buffalo Creek Casino over three years beginning in 2014-15.
The casino revenue has not been distributed to the city because of a dispute between the Seneca Nation of Indians and the state.
The four-year plan also calls for an increase in property tax revenue from new buildings and a 1 percent increase in state aid.
The city is also projecting that in future years, its solid-waste operations, which currently cost more than they generate, will become more efficient and that the subsidy required by city taxpayers beyond what they pay in garbage fees will fall from $3.2 million to $2.1 million in 2016-17.
Knowing how the Brown administration is funding its operations in 2013-14 causes concern for Schroeder, but residents will likely appreciate that their property taxes won’t go up, and if they own a commercial property, those taxes will be going down by 3.2 percent. City fees also will remain flat.
Total city taxes for residential properties remain at $17.95 per $1,000 of assessed valuation, and for businesses, fall to $28.02.
Reassessments, which haven’t been done in three years, won’t begin until 2013-14 and won’t take effect until the 2015-16 budget.
For senior citizens, Brown’s 2013-14 budget includes $50,000 for cooling centers during hot weather and for programming.
For young people, $1.1 million is allocated, expected to fund 1,400 summer jobs.
For neighborhoods, $50,000 is set aside for crime prevention and city beautification.
For the schools, $171,000 is marked for two attendance teachers.
To expand the tax base, $100,000 is planned for a marketing campaign to attract new residents and businesses.
The Brown administration has been criticized for not releasing grants to arts and cultural groups in a timely manner – as of last week, 2012-13 money set aside for the groups July 1 still had not been released. But the mayor’s proposed budget includes a new $100,000 competitive grant for these organizations.
For neighborhoods with eyesores, the city plans to demolish about 350 dilapidated structures with funding from a variety of sources.
The $482.5 million budget is about $100,000 less than the current year budget, and includes small increases in revenue from sales tax and parking enforcement, which has been enhanced by license plate readers and by the city’s Strike Force, a law enforcement effort that sometimes cites vehicles to be towed.
The use of one-time revenues helps cover a 14 percent increase in pension costs, flat property tax revenues, flat state aid and the loss of $18.7 million in a one-time advance of state aid the city had in 2012-13.
Common Council Member David A. Franczyk of the Fillmore District, often a mayoral critic, praised the administration during a budget hearing last week.
“They’re very serious about keeping their fiscal ship very tight, and that’s to be applauded,” he said.
Though it appears the Brown administration used every available revenue source, officials decided against using a controversial option from Gov. Andrew M. Cuomo, which would have allowed municipalities to immediately enjoy future savings from employees in a less-generous pension tier.
The city wasn’t sure how ratings agencies would view that, and didn’t want to take a chance, said Donna J. Estrich, commissioner of administration, finance, policy and urban affairs.
The Council continues its review of the budget this week, and has until May 22 to amend it.
The Buffalo Fiscal Stability Authority will review the budget when it meets May 15.