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Cash flow problems have prompted city officials to put millions of dollars in projects on the back burner, including sidewalk, street and curb improvements in many neighborhoods.

Describing Buffalo's cash reserves as "razor-thin," Comptroller Anthony R. Nanula warned lawmakers Wednesday that the city could face major fiscal problems if it doesn't stay on a regimented debt diet.

In a rare meeting between Nanula and the full Common Council, officials discussed a troubling trend: Some city funds have dipped to their lowest levels of cash in years. For example, the general fund's projected cash reserve dipped as low as $1 million at the start of the current fiscal year in July, compared with beginning cash positions that averaged $44.3 million in prior years. Officials blame the cash crunch on several factors, including delays in receiving state aid, costs associated with settling the teachers contract dispute and fund transfers that were approved this summer to hold down water rates.

"We are confronting a very serious financial challenge as reflected in the deterioration of the city's cash position," Nanula told lawmakers.

The long-term outlook is further clouded by uncertainties over whether the state will honor Buffalo's request for $31 million in additional aid. Council Majority Leader Rosemarie LoTempio said she spoke with a few state lawmakers Wednesday to underscore the severity of the problem.

"We're not crying wolf. This is a serious problem, and we need that state money," she said.

The discussion was sparked by a series of interfund loans that the Council approved Wednesday to keep nine capital projects on track. The vast majority of the $3.96 million in fund transfers involve improvements at various parks, playgrounds and traffic circles throughout the city.

Officials were originally planning on tapping into the city's general fund for short-term loans to finance nearly $9.1 million in projects, including curb replacements and other street improvements in most Council districts.

"Our cash position is razor-thin," Nanula said. "As it is, the revised list is still very aggressive when you look at the uncertainty we're facing. Frankly, I approach this with great reservations."

Interfund loans involve transferring money from the general fund to finance capital improvement projects, then repaying the money when bonds or bond anticipation notes are issued.

Some lawmakers, including Betty Jean Grant of the University District, raised concerns about the status of neighborhood projects that are essentially being put on hold until at least next year. Others, such as Delaware Council Member Marc A. Coppola, said he hopes residents understand the city's plight.

"When someone's sidewalk is broken and they expect it to be fixed this year, they're not going to be happy when it's put off for a season," Coppola conceded. "But it's the responsible thing to do."

Nanula agreed, noting the city's credit rating is already low. He warned that if additional spending makes it difficult for the city to pay off a $120 million short-term loan issued this summer, there could be significant fallout. A year ago, city officials agreed to go on a "debt diet" that imposed restrictions on capital spending over five years.

Council President James W. Pitts said he plans to arrange a meeting that will involve all branches of city government to further discuss cash flow problems and capital spending.

"It's important that we sit down as a government to see what the long-term fiscal picture looks like," Pitts said.


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