City Hall’s looming fiscal reckoning

News and analysis by Geoff Kelly, Investigative Post's political reporter

A malfunctioning fire alarm rang shrill and unrelenting on the 13th floor of City Hall last Thursday morning, contributing to an hour-and-a-half delay of the Common Council’s special session to adopt its amendments to Mayor Byron Brown’s proposed 2019-2020 budget.

Maybe the universe was trying to tell the Common Council something about that budget. If it was, they weren’t listening.

Once it began, the meeting took about 10 minutes. The result: The Council moved some money around various budget lines in order to fund projects and purchases dear to each member’s heart, but left Brown’s budget essentially intact.

This, despite concerns about risky revenue assumptions expressed by the office of interim Comptroller Barbara Miller-Williams in a budget critique issued May 10.

Those concerns are reiterated, if less forcefully, in a draft budget analysis performed by the Buffalo Fiscal Stability Authority — the control board — which has been in place since 2003, precipitated by the city’s fiscal crisis of 2002.

In recent years, the control board has been in “soft,” or advisory, mode, its staff and board members analyzing finances and contracts, commenting and making recommendations. But it can return to “hard” mode — in which it exercises substantial control over the city’s budgeting and borrowing — if the city fails to adopt a balanced budget, or if the city incurs an operating deficit of 1 percent or more.

The comptroller’s charter-mandated budget response deemed several significant revenue stream projections in the mayor’s budget to be “questionable”:

  • Casino revenue sharing, budgeted at $11 million despite the fact that the city has not yet received any of the $17 million revenue it budgeted from this source last fiscal year.
  • Sale of city property, budgeted at $6.8 million despite the fact that the city so far has realized less than $1 million of the $8 million it budgeted from this source last fiscal year.
  • $2 million from a proposed fee collected from banks sitting on foreclosed properties, despite the fact that there is no legislation in place to impart such a fee.
  • Several other income projections that the comptroller’s report described as risky or insufficiently justified.

In total, the comptroller’s report questioned about $21 million in projected revenues, and pointed out that the city will be on poor footing to deal with any shortfall: In the last two years, the city has used $57 million in reserves to close budget gaps, and $107 million over the past eight years.

The city likely will need to tap reserves when this budget year ends on June 30.

The hole in the current 2018-2019 budget will likely be between $10 million and $27 million — the higher number reflecting the probability that last year’s budgeted casino revenue share will not materialize, unless the state agrees to advance the city its share of the money the Seneca Nation of Indians so far refuses to pay.

That’s a huge problem: The city has no unassigned fund balance available to plug a deficit. Zero dollars. There is $92 million in the fund balance; $54 million is “assigned” and cannot be spent. The remaining $38 million constitutes the so-called “rainy day” fund, which represents 30 days operating funds, kept on hand in case of an emergency.

The city charter says explicitly that rainy day funds are not to be used for balancing a budget, but only for “extraordinary operating or capital needs that could not be anticipated and cannot be funded with current budget resources.”

Dipping into its rainy day fund to balance the current budget could trigger the control board to go hard, if its members have the political appetite to pull that fire alarm.

“If the City runs a deficit in the current year, assigned fund balance would be used and if depleted, the Rainy Day Fund would need to be used,” according to the control board’s draft budget analysis. “It is imperative the City remain structurally balanced as further draws on fund balance would further weaken the City’s financial position, and at this time there is no budget mechanism for the City to replenish fund balance.”

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The likely hole in the 2018-2019 budget was accurately forecast by Schroeder’s comptroller office in last year’s budget response, and in quarterly reports issued since then. The same is true of the holes in previous years’ budgets, which the Brown administration depleted the city’s reserves to fill.

“We were right,” said a member of the comptroller’s staff. “We don’t want to be right. But we were right.”

Investigative Post spoke with several members of the comptroller’s staff for this column. All but one requested anonymity, because their job security is uncertain.

The restructuring of a watchdog office

The alarms sounded in the comptroller’s budget response may not have compelled members of Council to action. (Though Fillmore Council Member David Franczyk did read parts into the record at the Council’s May 14 regular session.) But the report’s release did provoke a reaction from Miller-Williams.

According to members of the comptroller’s staff, Miller-Williams read and approved the budget response before it was released publicly, praising it as good work even if she didn’t like the message it delivered to the mayor, who is a close political ally.

After it was released to the public, Miller-Williams changed her tune, haranguing staff and challenging the numbers contained in the response. She suggested that she’d engaged outside auditors to review her staff’s numbers and intended to file a new or amended response that would be less critical of the mayor’s projections.

No new or amended response was filed with the Common Council before its special session Thursday. Nor was such a document filed with the control board.

But the possibility that a new or amended document might be forthcoming was a topic of discussion among Council members and staff during the delay in Thursday’s special session.

So was the expectation that Miller-Williams might appear at that special session, reportedly to refute the numbers in the report her office had issued the week before. She did not, despite requests from the Council; no one from the comptroller’s office attended the meeting.

This week Miller-Williams began, as is her prerogative, to purge the staff that her predecessor, Mark Schroeder, had assembled and to hire staff of her own choosing.

The first to get the axe, post-budget response: Patrick Curry, who has been Schroeder’s political aide de camp for many years. As such, Curry had no future with Miller-Williams; he resigned Tuesday just in advance of Miller-Williams filing his termination papers. Curry will join Schroeder at the end of June at the state Department of Motor Vehicles, where Schroeder is now commissioner.

Curry declined to comment on any tumult in the office, stating only that he had resigned and was proud of his service in the comptroller’s office.

Next in line, reportedly, are professional staff — the certified public accountants and municipal finance experts Schroeder hired in abundance, some of whom do not enjoy civil service protections. One of these, Vanessa Glushefski — an attorney and CPA who mounted, then abandoned, a primary challenge to Miller-Williams — was fired last month.

Another, who contributed analysis to the budget response, filed a complaint Thursday morning with the city’s Law Department, alleging discrimination and mistreatment at the hands of Miller-Williams since she was named interim comptroller last month. That employee expects to be fired soon.

The qualifications of those Miller-Williams hires to staff her office will say a lot about how competent and independent her office will be as a check on the powers of the mayor, who already wields significant political influence over the Common Council.

If the current fiscal year ends in a significant deficit, the control board should be alarmed. If the capacity of the comptroller’s office is diminished, everyone should be.

The control board meets Monday, May 20, to adopt its draft analysis of the mayor’s 2019-2020 budget and four-year financial plan.