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GOVERNOR OPPOSES HURD LOAN CUOMO SUGGESTS $23 MILLION IN LONG-TERM BONDS

Gov. Cuomo opposes lending Buffalo $23 million for refunds in the Hurd overtaxation case.

Instead, he proposes giving the city permission to issue long-term bonds to cover paying back 57,000 property owners who were overtaxed in the 1970s.

What's the situation?
Gov. Cuomo opposes lending Buffalo $23 million to repay taxpayers under the 1974 Hurd decision. He proposes, instead, that the city borrow $23 million without state financing and have more time to repay.
What is the advantage of this plan?
The city spends less each year to repay the borrowing and there's no cost to the state.
Where does the Legislature stand?
Opposition to a state loan is strong in the Assembly, but the Senate has passed it.
Why is there opposition to the bailout?
The state's financial problems are continuing.
Is the bailout dead?
Deputy Assembly Speaker Arthur Eve, D-Buffalo, says it is; Assemblyman William B. Hoyt, D-Buffalo, says he will keep pushing for an Assembly vote.

The governor's opposition to the loan has strengthened opposition in the Assembly, which may keep the bill from reaching the governor's desk before the Legislature recesses next week.

The Assembly's leaders, like the governor, are wary of the proposal because it would cost the state an unspecified, although relatively small, amount of money.

"It's dead," said Deputy Speaker Arthur Eve, D-Buffalo, adding that he hopes to convene a meeting on the issue later this year. But Assemblyman William B. Hoyt, D-Buffalo, disagreed, saying, "It's not over until the Legislature goes home."

Hoyt, the proposal's chief sponsor in the Assembly, vowed to keep lobbying Assembly leaders to bring the proposal to a vote before the recess.

The legislation, which was approved Monday by the Senate, is before the Assembly Ways and Means Committee. The committee has not scheduled a vote on the bill, a tactic that Assembly leaders use to kill legislation.

The governor, meanwhile, is offering a plan that would not cost the state any money and would help the city repay taxpayers owed refunds as a result of the 1974 Court of Appeals ruling overturning a state law that had allowed Buffalo and other municipalities to exceed their constitutional tax limits.

Under Cuomo's proposal, the city would borrow the $23 million while the state would change the Local Finance Law to give the city more time to repay the bonds. State law now requires a city that borrows to pay a large court judgment to pay the money back within 10 years.

By stretching out the repayment, the city would have to spend less each year on the repayments.

North Council Member David P. Rutecki described the governor's position on the Hurd refund as "stupid" and said that extending the bond repayment period would only add to Buffalo's interest costs.

"It would be in our interest to pay this quickly," Rutecki said. "I'm surprised he opposes this. As far as I'm concerned, it means the governor believes Rochester should get better treatment than Buffalo."

Rutecki said the loan would be listed as a cash advance by the state and not an appropriation. He said that distinction means it would not add to the state's budget difficulties.

Mayor Griffin declined to comment about the Hurd situation.

Interim City Comptroller Joel A. Giambra said the governor's approach would cause serious fiscal problems for Buffalo.

"I'm disappointed with the governor's response to what I consider to be a rational, reasonable solution to the problem," he said.

Giambra said that forcing the city to issue bonds to repay the $23 million Hurd settlement would cost $9.7 million in interest costs if repaid in 10 years, $14.2 million in 15 years and $18.7 million in 20 years.

He said Buffalo could not afford to borrow that much money without harming its other bond programs.

"It could force us to abandon capital projects for a couple of years," Giambra said.

Earlier this month, Rutecki said that if the state failed to provide the loan, city officials would be asked to find other alternatives to provide the $23 million needed by next April 1 to start making the payments.

One option would be using the entire 1991-92 capital improvements budget. Such a drastic measure would require postponing construction projects for a year, Rutecki said.

The Council last month approved a Rutecki resolution calling for the $23 million state loan and payment of Hurd claimants by April 1.

But Delaware Council Member Alfred T. Coppola, a member of the Hurd settlement task force, said that if the state doesn't provide the loan, Hurd claimants may not see their money until 1992.

In explaining the governor's opposition to lending the city $23 million to pay off the Hurd claims, Gerald Crotty, his secretary, pleaded poverty.

"There's no money in them thar hills," he said. "Whatever money there was (is) in the budget."

He said the city could guarantee the bonds for the Hurd refunds with the savings from its lower payments to its employee pension plan.

The city saved $15 million last year after State Comptroller Edward V. Regan lowered the pension contributions for all municipalities in the state-run system. From that reduction, the city continues to enjoy an annual savings of $4.5 million.

In addition, the city will save millions more this year because the Legislature and governor ordered fundamental changes in the way municipal pensions are paid.

"We're enthusiastically pushing this proposal, and we think it's the most reasonable alternative," said Claudia Hutton, spokeswoman for the state Division of the Budget.

Crotty said the plan was offered to city officials several months ago. But Hoyt and other legislators said city officials never asked for that legislation.

The request for the $23 million state loan was modeled after a $35 million state loan given to Rochester in 1981 to solve its Hurd problem. As with Rochester's loan, the state would lend Buffalo the funds each year and be repaid in the same fiscal year.

The state would lose the interest that would accumulate on that $23 million while it was held by the city, Hoyt concedes.

Ms. Hutton of the budget office said the Rochester loan is costing the state $1.5 million a year in lost interest. "It's substantial dough," she said.

Another obstacle to Hoyt's proposal is the lack of sympathy by several officials in the Legislature and on the governor's staff. Both Rochester and Buffalo, they noted, were offered loans several years ago, but Buffalo turned down the loan to fight the case in court.

THE HURD BAILOUT

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