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With the clock ticking toward an April 1 deadline, Buffalo's garbage contractor made a new offer Saturday -- it will lower the disposal rate charged to the city and save taxpayers an estimated $500,000 a year.

American Ref-Fuel, which burns the city's garbage at an incinerator in Niagara Falls, also claims Buffalo could save an additional $1.25 million a year by hauling more than half its garbage directly to the Falls.

City crews now haul garbage to a transfer station on South Ogden Street, and a second contractor then transports it to the incinerator.

City Hall, which received the offer late Friday, promised to study it but also plans to go ahead with its search for a new contractor and a new way of disposing of its garbage.

Faced with a $25 million gap in next year's budget, the city is seeking ways to save money.

"We have to do a better job with these contracts," said Stephen T. Banko III, a confidential aide to Mayor Masiello.

The city began looking for a new contractor when American Ref-Fuel indicated it would increase its $35.07 per ton incineration fee. Banko said the city wants to find a cheaper alternative by bidding out the work.

Competing bids are expected to be opened April 4, three days after the city's deadline for negotiating a contract extension with American Ref-Fuel.

Eager to avoid that bid opening, the company is trying to sweeten its offer to the city, its largest customer. The contract is valued at $5.4 million.

"We want them to succeed in turning around the deficit and we want to be part of that," said Timothy K.McCarthy, the company's business manager. "And obviously, we don't want to lose them as a customer."

The proposal includes a rate reduction from the company, and a suggestion that Buffalo haul garbage from the northern half of the city directly to the incinerator. The change would save the city transfer fees and lower transportation costs.

However, Banko said the city's public works and street sanitation officials have reservations about the city's ability to haul garbage directly to the Falls.

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