ORDINARILY, a municipality that goes running off to the state to be bailed out of an overtaxation problem might well expect to get the back of Albany's hand. After all, who was it that did the overtaxing?
But Buffalo City Hall's plea for a $23 million revolving interest-free loan to finance Hurd case property-tax refunds isn't that simple. There are good reasons why Albany should deliver. Gov. Cuomo and his budget officials should rethink their newly-expressed opposition to the loan and do their best to see that it is forthcoming in time to make refunds by next April 1, the Common Council's stated deadline.
The Hurd case, with historical roots more than 20 years old, involves city taxes that were collected in amounts over the state constitutional limit to finance pension and Social Security costs.
Buffalo's plea for state help is justified because:
It was a state law that allowed the overtaxation. True, the original law was dreamed up by Buffalo city officials. But when it was thrown out of court in an order that did not include refunds, the State Legislature's lame response was to merely authorize such taxation all over again. Predictably, the Legislature's answer was voided by the courts too -- this time with refunds for four years in the mid-1970s.
There's a Rochester precedent
Albany, back in 1981, made a similar type of loan of $35 million to Rochester, which had overtaxed under the same law. Rochester has paid its overcharged taxpayers refunds at 61 cents on the dollar, the same rate Buffalo proposes to use. Rochester hasn't paid back the loan yet. True, Buffalo fought the case to the point of desperation, stalling it in the courts, while Rochester sensibly folded its cards much earlier. Albany officials are said to be miffed at Buffalo's tactics. But that's not much of an excuse for discriminatory treatment.
The alternative is far from ideal. With no state loan, the city would issue bonds to gain the refund money. Normally, bond money would go only for construction projects. Cuomo is proposing changing the State Finance Law so the city will have more time than the legally-permitted 10 years to pay off the refund bonds. The annual hit on the city budget would be less that way, but Buffalo -- in reality -- would be paying some of its 1974 city government expenses well into the 21st Century. And, in going with longer-term bonds, the city would pay much more interest over the years. That's no way to run a railroad.
Griffin hasn't helped city's cause
Mayor Griffin is not blameless. Besides years of delaying tactics in the courts, the mayor's habit of bad-mouthing the governor cannot help the city's cause in Albany.
The state loan would be structured in a complicated way so that no actual appropriation would be needed. The city would do a yearly short-term borrowing that would permit the return of the money to Albany for part of each year so it never shows on the books as an appropriation. Albany's loss would be whatever interest it could have earned on the money while it is in Buffalo, not the money itself.
Cuomo should relent. The Hurd case is an old mess. It should be concluded as soon as possible.