More bad budgeting from Buffalo politicians

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Writing about the City of Buffalo’s finances is like watching the movie Groundhog Day, but the wheel of suffering never stops turning. 

Before the story reaches its happy-ever-after conclusion, the film rewinds to the beginning. Again and again, year after year.

The Common Council on Tuesday adopted, with few minor amendments, Acting Mayor Chris Scanlon’s proposed budget for the city’s upcoming fiscal year, which begins July 1. 

The $622 million plan recycles many of the fiscal sins of the Byron Brown administration, whose specious revenue and expense projections yielded deficit after deficit — backfilled first with cash from the city’s saving accounts and more recently with federal pandemic relief funds. 

Now that money’s all gone, leaving the city to correct its chronic budget imbalances without a safety net.

Scanlon has been far more frank about the city’s shambolic finances than his predecessor, who refused to raise property taxes even as the cost of delivering basic city services climbed higher. After the city’s state-imposed financial control board shifted into advisory mode in 2012, the Brown administration proceeded to spend down $109 million in savings accrued during the board’s nine years of “hard” oversight.

Ten years ago the city had $43.4 million in savings it could use to fund special projects or plug unforeseen budget gaps, as well as a “rainy day fund”  — 45 days’ operating funds to be tapped only in the event of an emergency.

We still have the rainy day fund, though it’s slightly underfunded at $50.2 million. Our savings are tapped out. 

Scanlon’s budget raises the property tax levy 8 percent this year. His four-year financial plan projects smaller increases in the following three years. Still, the plan adopted by the Council Tuesday doesn’t inspire much confidence.

On the expense side, the adopted budget:

• Funds overtime pay at nearly $10 million less than the city’s average expenditure since 2021. The Brown administration underfunded overtime by an average of $13 million in that period.
• Cuts $16.5 million in salary costs by not filling about 300 currently empty positions, which is not quite the same as eliminating the jobs and can further drive up overtime costs.
• Sets aside precious little money for pay raises to uniformed police and firefighters, whose contracts expire June 30, or for city workers in three other unions whose contracts will soon or have already expired.
• Projects employee health insurance increasing by an average of 2.3 percent over the next four years — less than a third of the actual annual average cost increase in the past three years.
  

There are small cost-cutting promises that might be hard to keep, too. 

For example, Scanlon has held down departmental spending since he took office last October — office supplies, furniture, fuel, travel — in order to fight off a looming deficit in the current fiscal year.

The administration projects cutting that kind of spending further over the next four years. But the city’s control board, in its analysis of Scanlon’s annual budget and four-year financial plan, said that expectation “may be unreasonable.” 

Because eventually you run out of copy paper and diesel fuel, and then what are you paying your employees to do?

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Scanlon also imposed a “soft hiring freeze,” basically keeping those 300 budgeted but vacant jobs unfilled unless they are deemed “essential” or produce revenue for the city. 

These are not layoffs, but they do reduce the city’s capacity to deliver services. There will be 48 fewer uniformed cops on the street than the new budget allows. There will be 13 fewer employees issuing permits and performing inspections, and 13 fewer picking up garbage and maintaining streets. There will be 10 fewer workers tending to the city’s parks. The city’s law department has 14 positions that are budgeted but unfilled.

Spending on the fire department is up a wee bit. It’s down a tad for police and mostly stagnant in other departments. Spending in other departments is either down or stagnant. 

The amount of money earmarked for settling police-related lawsuits is far below what the city has spent in recent years. This year’s tab will likely drive the city into deficit by June 30. 

“Uncertain,” “overestimated,” and utterly familiar

However, as was the case with Brown’s budgets, the real issues are on the revenue side. That’s where the barrier between fact and fiction grows thin.

The control board’s analysis found Scanlon’s four-year financial plan relies on nearly $66 million in revenues it described as “uncertain” or “overestimated.” These are terms the board used year after year for the past decade to describe Brown’s revenue projections — presciently, as it turned out, given the city’s chronic budget imbalances.

Those unreliable revenues include:

• $38 million in proceeds from the downtown Seneca casino, despite the standstill in negotiating a new revenue-sharing agreement with the nation.
• $9.8 million in increased state aid, despite the absence of any hikes in the state’s own financial plan.
• $18 million in revenue from parking meters, parking tickets and traffic violation fines.

In its initial analysis, the control board also worried about Scanlon’s four-year plan relying on $57.1 million from two revenue generators that required state approval: the sale of four city parking ramps to a newly formed public authority and the imposition of a hotel occupancy tax.

Both those measures were approved in the state budget signed this month by Gov. Kathy Hochul. The 3 percent hotel tax is expected to bring in $3.4 million in the coming year and nearly $15 million of the next four.

The hotel tax is probably a good deal: Lots of municipalities collect them, and a few bucks added to a hotel bill is unlikely to drive away visitors. It’s money that doesn’t come at a cost to city residents. 

The cavalry purportedly coming over the hill — taking the place of federal pandemic aid and city savings — is the sale of the ramps. That sale will yield between $40 million and $60 million, according to the Scanlon administration, which will help to balance budgets over the next four years. 

But there are lots of uncertainties.

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What are the ramps really worth? 

What will it cost the new state authority to borrow the money to buy them? 

Will the authority increase parking fees to meet the cost of servicing the debt and funding capital improvements, perhaps driving up parking fees at privately owned lots as well? 

Profit from the ramps fed $4.6 million into the city’s general fund last year. The administration insists the city’s general fund will continue to receive a share of annual profits from the authority, though far less than it gets now.

Is it really worth selling future revenue for a big upfront payment?

And what if the sale of the ramps takes a while, so that the money doesn’t arrive in time to balance this year’s budget?

We know the answer to that last question. The control board last month asked Scanlon to produce a contingency plan, should the sale of the ramps fall through or move too slowly to help next year’s cash flow. 

If that happens, the administration revealed in budget workshops last week, the city will take out a short-term $30 million loan to cover expenses until the money comes in. The city would also start laying off up to five percent of the city’s 2,431 workers. That’s 122 people.

The complicit Common Council

Lawmakers took turns Tuesday sharing blame with the Brown administration for the bad budget practices that led us here. These modest displays of self-flagellation have become fashionable in Council chambers over the past year.

The Niagara District’s David Rivera accepted responsibility for voting yes on bad budgets for 17 years. He voted no on this one, but that’s partly politics: He’s an ally of state Sen. Sean Ryan, who’s running against Scanlon for mayor this year.

The only other no vote was the University District’s Rasheed Wyatt, who is also a candidate for mayor. The other six voted yes.

Masten’s Zeneta Everhart and Ellicott’s Leah Halton-Pope apologized to city residents and vowed to do better, while noting — as they often do — that they are newcomers, elected in 2023, at the tail end of the city’s long, slow march toward bankruptcy.

That’s been a reasonable excuse, but it expired Tuesday.

The Council has little leeway to amend a mayor’s proposed budget and less leverage. Lawmakers can only move money around, they can’t change the budget’s fundamental structure. If they reject a mayor’s budget proposal, it eventually passes into law anyway.

The only major amendment the Council made was to trim $1 million from Scanlon’s already questionable projections for police and fire overtime — $200,000 from police, $800,000 from fire. Halton-Pope said those figures were derived from overtime charges accrued as a result of police and fire presence at special events. The Council on Tuesday asked the Scanlon administration to negotiate agreements with “major venues or event organizers” — KeyBank Center and Sahlen Field, for example — to pay those costs.

The Council also requested that the resulting savings be moved to “a reserve account,” which Halton-Pope said on Tuesday would be used to replenish the city’s depleted reserves.

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Both ideas seem reasonable. The city should be able to charge for-profit businesses for services provided above and beyond the day-to-day scope of police and fire activities. And it would seem prudent to put that money in a piggy bank.

But there are unlikely to be any coins for that piggy bank, because the baseline projections for overtime costs in the adopted budget bear so little relation to the actual costs incurred in recent years.

In the four most recently completed budget years, the Brown administration — with Council approval — under-budgeted overtime by $52 million, according to the city comptroller. As of April 6, the city had already spent $28.3 million on overtime — mostly for police and fire — blowing past its budget by $7 million. That overrun might hit double digits by the time the current fiscal year closes June 30.

The city’s average overtime expenditure for the past four completed budget years is $34.5 million. Yet Scanlon’s budget funded the line at $24.6 million without offering any specifics as to how his administration would achieve that 28.7 percent reduction. 

And now the Council has shaved another $1 million from that — albeit while pointing clearly at how that reduction might be achieved.

But even if the mayor and the Council don’t waive overtime charges for events and venues they or their most influential constituents favor — as they perennially waive permit costs and other fees associated with civic events and entertainments — that million bucks won’t go toward replenishing the city’s empty saving accounts.

It’ll go toward cost overruns in overtime, mostly for police and fire, which — dollars to donuts — will once again be many millions over budget by next spring. As it was this spring and every spring in the last decade, now and forever, amen.