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Buffalo chalked up a surplus of nearly $5.6 million for the fiscal year that ended June 30, marking the sixth consecutive year in the black, officials announced today.

The amount, representing about 1.6 percent of the city's $340 million for the year, will be set aside for the city's upcoming revaluation, officials said.

Mayor Masiello and City Comptroller Joel A. Giambra have agreed that most of the surplus will be used to offset reductions in property tax collections, which are projected to begin sliding in 2001 as a result of lower property valuations.

"It's a modest surplus . . . that's being put away for the future," Masiello said. He also pledged: "We're not going to spend it. . . . We're not going to blow it."

Neither official will recommend that any of the money be used as a cushion against the Buffalo Public Schools' potentially huge liability in its ongoing litigation with the Buffalo Teachers Federation over back pay owed to teachers.

Instead, they say the city needs a fund to help pay for services if, as expected, property tax revenue begins to drop in about two years.

"This continues our policy and plan to become more competitive," Masiello said. "We're trying to get more lean and competitive."

"When you have six consecutive years of surpluses, it bodes well for the work that the mayor and his administration have done and the work that my office has done in collaboration with him," Giambra noted.

The comptroller also credited city officials with putting together more realistic budgets than in the past and "riding herd" on city spending.

"This is indicative of the success the budget office has had with saying no," he said.

City finance officials also expressed pleasure that, in a series of ever-leaner budgets, Buffalo managed to cut spending by more than $1.9 million during the year.

"All in all, we're very pleased. . . . This is . . . good news," said Eva M. Hassett, city administration and finance commissioner.

She called the findings "the result of a lot of hard work done by everybody in City Hall and particularly in this office . . . to try and get us to a point where we knew we were going to have money when we got to the end."

Spokesmen for two Wall Street bond firms, Moody's Investors Service and Standard & Poor's, also complimented the city for its fiscal management but declined to speculate Monday if continuing surpluses would improve the city's bond ratings.

Moody's analyst Helen Clegger also pointed to the city's unknown liability in the dispute over back pay for teacher, saying, "The city's destiny is linked to the school district . . . and overall hopes for economic recovery."

In addition to other funds already set aside, Masiello and Giambra want more than $4.2 million of the surplus earmarked for an "Assessment Revaluation Stabilization Fund," and $1.1 million to pay for shortfalls in revenues caused by the state's STAR property tax relief program.

They will argue that the city must use revaluation to reduce taxes and make the city a more attractive place to live and do business. The stabilization fund is considered a way to soften the impact as tax collections decrease along with property values.

The 1998 surplus resulted from lower-than-expected payments to the state pension fund, spending cuts, increased collections of taxes and other debts owed to the city and aggressive investing, according to city accountants.

All in all, the city took in more than $345 million in revenues and transfers during the year, while it spent slightly less than $340 million, accountants reported.

But officials also warned that the city cannot expect a repetition of high levels of investment income or the $6.9 million in savings from lower outlays to the state pension fund, both resulting from a soaring stock market.

Set-asides recommended by Masiello and Giambra also include money to offset continuing shortfalls in the city's garbage enterprise fund.

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