Mark Schroeder serves as Buffalo’s fiscal watchdog in his job as city comptroller. He made news recently by raising concerns about City Hall’s budgeting practices, which have involved the use of reserve funds the past three years to balance the books.
Schroeder, 57, spent 25 years in the private sector, working for two food companies before moving into electoral politics in 2001 as part of a political organization lead by Brian Higgins. Schroeder served three years in the Erie County Legislature before winning election in November 2003 to the New York Assembly. He represented Orchard Park, West Seneca and portions of Buffalo and Lackawanna until his election to comptroller in November 2010.
Schroeder is a graduate of Bishop Timon High School, Erie Community College and Empire State College.
Investigative Post Editor Jim Heaney interviewed Schroeder, Feb. 5. A 4 minute, 1 second video clip featuring interview highlights is posted above. The full 20 minute, 46 second interview is posted deeper in the transcript, which has been edited lightly for clarity.
Heaney: We’re going to talk a little bit about City Hall and your relationship with the mayor and the deputy mayor. I want to talk a lot about the state of finances in the city. According to a formula just released this past week by the state. Buffalo is one of 23 cities, towns, and villages near Niagara County that’s now labeled fiscally distressed because of high property taxes. And I want to talk to you a little bit about the shape of finances and talk a little bit about recycling and housing courts if time permits. Let’s start out – you’ve been comptroller a year and a half or so.
Schroeder: 14 months.
Heaney: Okay. You were elected a year and a half ago. Describe your relationship with the Brown administration. They have a reputation as being difficult to deal with in some quarters. What has been the working relationship?
Schroeder: A lot of it I think stems from how I operate and the way I operate is in a very professional way. And so I have professional relationships with those especially that I have to have a relationship with. And the comptroller of the City of Buffalo has to have a relationship with the mayor of the City of Buffalo and also the Common Council members, School Board members, the superintendent. And so I have a very professional relationship.
If I’m not afraid of Sheldon Silver, I’m certainly not afraid of the mayor or anybody in City Hall.
Heaney: How open are they, because obviously you’re the watchdog? Describe the dynamics: how open to input, how open to criticism are they?
Schroeder: First of all, I have a professional, cordial relationship with the mayor of the City of Buffalo. However, let me remind you and others is that I’m not afraid. Just like I wasn’t afraid of the speaker (of the state Assembly) who arguably was the most powerful politician in New York State. If I’m not afraid of Sheldon Silver, I’m certainly not afraid of the mayor or anybody in City Hall. We are guided by Article Seven in the City Charter and we are guided by best practices. And there have been some times where I have suggested certain things that I’m certain that the mayor and the deputy mayor and others aren’t happy about. But that isn’t my problem. That is a problem that they have to deal with.
Heaney: So generally speaking, it’s a working relationship?
Schroeder: It’s a working relationship and I pride myself on that because that is what the people elected me to do is to work with others.
Heaney: Let’s talk about the state of Buffalo finances. And I want to start out with kind of my take on it and get your reaction. Certainly the last term of Tony Masiello’s tenure, things were really rough – a lot of red ink. Byron Brown and company have generally received good grades for their fiscal management of the budget. Looking at things from my perspective, however, there are some very troubling trends. The city and the school board remain a ward of the state. As you know, close to 40 percent of the city budget comes from state aid; the school district is over 70 percent. So without New York State we are hopeless. Even with that dynamic, the way the city has balanced the books the last couple years has been by taking money out of reserves. There’s been a policy that the mayor and the Council have both pursued of tax cuts – property tax cuts – which is the city’s primary source of revenue it can raise on its own. So what the city can do to help itself it hasn’t done. What it’s done is balance the books by state aid and by dipping into reserves, which to me doesn’t suggest that the city budget is really sustainable. React to that.
Schroeder: First of all, it is not sustainable if you continually go into your savings account.
Heaney: And how many years in a row has that happened?
Schroeder: Well, for the last three years, the mayor and the city has went into savings. It’s an unassigned category of $40 million. That averages about $13.5 million per year. As you pointed out, there’s only $12.2 million left. Problematic. Does it mean that they use $13.5 million per year? No. One year they used $11.5 million. One year they used $12 million. One year they used $16.2 million.
The City of Buffalo should be living within its means right now.
Heaney: But there’s been a steady raid on the savings account.
Schroeder: Right. And the concern is – the concern that I have – is the same concern that the rating agencies have: Moody’s, Fitch, Standard and Poor’s. And I’ve shared this directly with the mayor in that once they feel there is a trend – a trend of using the fund balance, it becomes problematic because as the viewers know, we’re proud of this, Buffalo is in the A category rating-wise from the rating agencies, it’s very very good. Yonkers and certain municipalities in Michigan, in California, they only wish they could be in Buffalo’s position. That’s a good thing. However, we have to be careful, especially when you’re down to $12.2 million.
Heaney: There’s no more margin for error is what you’re saying. Am I correct?
Schroeder: Absolutely. And so one of the things that you pointed out is the mayor’s strategy on property tax.
Heaney: The mayor and the Council – when it comes to election time they can all get up there and say, “I’ve cut property taxes.”
Schroeder: Right. And that is something that the mayor has agreed to until 2014.
Heaney: Until he gets re-elected, presumably.
Schroeder: And so at some point in time, as you pointed out, if state aid is 43 percent and property sales tax is 46 percent and it’s not going up – right because it’s frozen. And then the sales tax is 16 percent and fines and fees are 15 percent. At some point in time, it does become problematic and you have to deal with it.
Heaney: Let’s talk about that point in time. Is that point in time a year from now? Is it two years from now? How soon is the City of Buffalo going to have to start living within its means? Because right now it’s not.
Schroeder: The City of Buffalo should be living within its means right now.
Heaney: Would you agree with my assessment?
Schroeder: They’re not. Period. They’re not. And so some of the things that they’re doing are viewed as credit positive by the rating agencies – the cut on the property taxes. Also when the control board went from a controlled period to an advisory period …
Heaney: Hard to soft.
Schroeder: Hard to soft. Moody’s said it was credit positive because now the City of Buffalo …
Heaney: Now when you say credit positive you mean?
Schroeder: It’s positive for Buffalo because in this particular case, we are taking responsibility for our finances as opposed to a nebulous board on the BFSA (control board) – nice people but they’re nebulous. Nobody knows who they are. They’re not elected by the City of Buffalo.
Heaney: Now the dynamic as you explained to me before we went on camera is: On the revenue side we’ve got some expenses that are going up, primarily pension and health insurance. On the expense side the way they more or less compensated for that is by continuing to reduce the size of the city payroll. And that more or less is a wash. But you’ve got declining revenues and you make up for that by dipping into the savings account so to speak.
Schroeder: You’ve got it right, Jim. And it’s troubling – it would be troubling to any comptroller. When revenues are down – third year in a row – revenues are down. Expenditures are up $2.9 million. And then, as I know and you know and the viewers know, a lot of that will have to do with pension costs up, health costs up. And so at some point in time, we are using the savings account to balance the budget. It’s problematic. There are certain things that are wrong. They need to be fixed. One of which is deficits that come up seven years in a row – solid waste deficit.
Heaney: Let’s talk about solid waste. Now this may sound deadly to our viewers, but it’s really not. Investigative Post has done some reporting in the last three months about the city’s failure to recycle at a rate even close to the national average. And that has cost them revenue they could be getting through recycling. You can basically sell your recyclables. It’s also jacked up the cost of dumping at landfills and as a result – partly as a result – that account is running about $3 million in the red. Are they supposed to be running in the red or are they supposed to be balancing themselves out?
Schroeder: The best practices would suggest that they need to be at a balance. For instance, there’s another enterprise fund – parking fund. And the parking fund over the last several years had a surplus. And so what is happening is that the administration knows that there’s a surplus. And rather than take the surplus and to invest it back into the parking enterprise fund and what that represents, there’s a sweep going on. And then because there’s a deficit, as you pointed out, $3.2 million per year on solid waste. And there’s a sweep of the money and then to balance it out.
Heaney: So basically parking is subsidizing trash collection.
Schroeder: Yeah. And so what I’m trying to say is that fix the problem.
Heaney: How do you fix that problem? Part of the solution I assume is to increase the recycling rate.
Schroeder: These are certain things, Jim, that the comptroller doesn’t have a standing in the mayor and the administration.
Even if we were to tie the national (recycling) average, we would still have a deficit.
Heaney: Stepping back as a watchdog – you’ve got a $3 million plus deficit. You probably have got to do something on the expense side and probably something on the revenue side. So is it more recycling in a more cost efficient contract with the waste hauler?
Schroeder: The answer to that would be yes. The average rate now in terms of recycling is 11 or 12 percent. The national average is 34 percent. Even if we were to tie the national average, we would still have a deficit. Would it be lower? Of course it would be lower. Perhaps fuel, gasoline costs are something that really needs to be examined. But the bottom line here is that the contract that the City of Buffalo has with Modern expires in June of 2015. So therefore I would encourage the administration to enter into an RFP request for proposals of companies and corporations who are able to do it. And that may be one way to mitigate.
Heaney: Competitive bidding is what you’re saying.
Schroeder: That’s what I’m saying.
Heaney: So up the recycle rate and competitively bid the work and see if you can get a better price.
Schroeder: That might be one way to look at it in that I would hope that the administration would take that under consideration.
Heaney: Let’s talk about another problem spot in City Hall, which Investigative Post has reported on and that is during the first six years of the Brown administration, the Housing Court imposed more than $20 million in fines. The court collected less than a million. The city collected practically nothing on top of that. You’ve been involved in conversations with the court and with the Brown administration in an attempt to straighten out the system so that some of that past fine money is collected and, moving forward, there’s a system in place to make sure that this doesn’t happen again. A big problem we uncovered was the system was in shambles in terms of the paperwork, the ability to track, the ability to go after delinquent landlords who hadn’t paid fines. To what degree has that system been fixed?
Schroeder: At the time of your report I believed your report to be credible, as I still do. And so therefore I used that as almost the first thing you do when you do an audit is you probe to get the information. You did a lot of that. So we took a lot of that information and we took the opportunity to meet with the City of Buffalo treasury and also with the City Court. And so the one thing that we found out is certain is that there is not communication between the City Court, the Treasury Department, the Division of Collection within the Treasury Department that is collaborative – that’s the same system.
Heaney: Is that improved?
Schroeder: I went with a special assistant of the comptroller that you’ve met before. We went and we met with the city court. We met with – corporation counsel was there. We met with City Court judge and people to try and have this conversation. Since then, we have drafted up a letter. We’ve identified six or seven things that we believe would have to take place in order for it to get better and for us to collect because a comptroller is happy with more revenue coming in, especially the segment we just did.
Heaney: Let me stop you. I think that report aired in probably July, so we’re six, seven months out. How much real progress has been made or is it still in the talking stage? Ultimately it’s not your job to fix, but you’re part of the process. How far along are we? Are we a little way in? Are we half way there? Are we most of the way there in terms of getting a system in place that will enable fines to be collected?
Schroeder: The only reason why I can answer the question is that we’ve taken the initiative to try to do something positive so that this would work.
Heaney: How far along are we?
Schroeder: I believe that we have made progress.
Heaney: A little or a lot?
Schroeder: I think we’ve made some progress in that we have agreed on the five or six areas that has to turn around in order for the collections to come in and for the revenues to come in.
Heaney: Is there a collections agency in place yet that’s ready to start collecting or is that still something that’s in the process?
Schroeder: Again, that would be a question for the city, although I’ll answer it for you because of the initiative we know what the answer is. The answer is they have done an RFP and apparently that have decided on a collection agency through the RFP process, which is also the same collection agency that they had previously.
Heaney: So the agency that wasn’t collecting previously has been retained to presumably collect in the future?
Schroeder: Through the RFP process.
Heaney: Alright, so we’ve got the same agency on board. The systems aren’t quite in place yet to allow them to do their work. Do you have any sense of those $20 million plus? How much of that remains really collectible given that some of it’s five, six years out? Is most of that going to be written off as bad debt?
Schroeder: I would say probably $1 million or so it would be more reasonable than $20 million.
Heaney: Is even a million reasonable?
Schroeder: I think a million is a reasonable number. But Jim, only if all of the areas identified in order to provide communication between the entities who have responsibility to this. We’re doing what we can do to bring the parties together to communicate and to talk and to hope that there will be revenues collected that would be positive for the citizens of Buffalo.
I am not thinking about running for mayor now, in 2013 or later.
Heaney: Let’s look forward a little bit. There’s a mayor’s race this fall. Do you expect Byron Brown to have a serious Democratic challenger in the primary?
Schroeder: I know probably what you know and the viewers know, there have been…
Heaney: No, you’re on the inside. You’re on the inside of the party. You’re on the inside of City Hall.
Schroeder: No I’m not on the inside of the party. I never have been to tell you the truth.
Heaney: Well you know people on the inside. (chuckles)
Schroeder: Yeah, I know the people. But you’re the investigative reporter, not me. But I will tell you what I know and what I know is that I don’t think there’s been any official announcement for the mayor running for re-election. There has been no official announcement of some of the challengers that have been reported out there.
Heaney: Based on what you’re hearing and based on your hunches, do you expect the mayor to have a Democratic primary opponent?
Schroeder: At this moment in time I would have no way of knowing. I do know that there is a Democrat out there who goes to many of the same events that I go to – neighborhood events.
Heaney: Bernie Tolbert is out there and he’s making the rounds.
Schroeder: He’s out there and some people feel that he is going to run for mayor.
Heaney: Let’s look down the road. You’re obviously not running for mayor this year. Correct?
Schroeder: My answer is that I am not thinking about running for mayor now, in 2013 or later. I am very happy though that people ask me the question – not only reporters, but people across the City of Buffalo ask me the question. I take that as if they know that I’m doing a good job in the job that I’m in. And I appreciate their comments.
Heaney: Do you have any potential interest down the road? Potential interest.
Schroeder: Quite frankly, I never really thought I’d be comptroller. And so the answer would be I am dedicated the rest of my life to public service. The first 25 years I was in the private sector. And I want to be an elected official and so I never really had designs on being comptroller. The answer is I always stay open to opportunities that I feel I can actually make a difference and making a difference as comptroller for the City of Buffalo. And so therefore the only thing that I’m thinking about is doing that job and running for re-election in 2015.