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STATE WARMS TO IDEA OF CONTROL BOARD FOR CITY

Concerned about worsening deficits in the coming years for Buffalo, state officials say they are now considering a full-blown control board with extensive say over how the city spends and collects its money.

Meanwhile, the State Legislature on Monday overrode a veto by Gov. George E. Pataki of a bill that included an advanced aid payment for Buffalo of $20 million -- money Mayor Anthony M. Masiello said is crucial for keeping the city in the black.

The push for a strong control board -- tougher than the oversight panel that had been under consideration the past month -- comes as State Comptroller Alan Hevesi briefed some officials on the city's financial problems. His full report could be ready by the end of the week.

A control board, used in recent years in Nassau County, Yonkers and Troy in Rensselaer County, would be established in return for the state agreeing to let the city borrow money for operating expenses to help close its deficit in the coming year and restructure the police and fire departments.

Masiello said he's heard the same rumblings in Albany about a control board, adding that his May 1 budget message included it as a last-ditch option for achieving fiscal stability. "But if there's going to be a control board, it better bring with it money to deal with substantial increases in health and pension costs," said Masiello. "Greater oversight isn't going to solve the problem. It's going to take money and an ability to adjust enormous cost increases."

State Sen. Dale Volker, R-Depew, said a financial control board may be required for Buffalo but agreed with Masiello on one key point. "A control board will have to come up with money, and that will mean coming from county residents or the state," Volker said.

"Many in the business community think a control board can just come in and violate contracts, that they can just hammer people. But this is not like business people who can just throw people out of work. This is a government," Volker said. A control board, the veteran lawmaker said, should be the last option.

"We might have to do it, but I wish there were another way."

The debate over imposing stringent oversight on city finances dominated debate at a special Common Council session Monday, when lawmakers voted 12-0 to extend Buffalo's budget process by two weeks. The charter requires the Council to approve a spending plan by May 22, but ongoing uncertainty over state aid to pay for police and fire restructurings prompted the Council to extend the budget deadline for only the second time in the past decade.

Council President James W. Pitts said there are growing signs some type of control board will be created. "I don't think it's good," he said. "It would cause chaos if a full-blown control board came in and tried to break the unions."

Pitts also fears a control board would create a "taint" that would further damage the city's struggling economy. "I think it would turn away business activity and provide added impetus for more people to leave this area," he said.

Pitts is pushing an alternative to a state oversight panel known as a municipal assistance corporation. It would lend money to Buffalo as the city implements reforms. The effort, he said, could be funded by increasing the sales tax by .025 to .050 percent.

But there are still unanswered questions about the composition and powers of a control board, Masiello said.

"Nobody really knows what it would be at this point," said Masiello. "But if it ends up being some wishy-washy board that comes in here just to hold our hands, that won't accomplish anything."

Control boards set up in other communities over the past couple of decades have taken different forms, but they all have a common theme: financial control. In some cases, the boards conducted regular audits and had the power to approve or reject all contracts. In almost all cases, the boards have been ordered to devise four-year financial plans for the governments they oversaw.

If the state insists on imposing a control board, Masiello said, it should be given the power to nullify union contracts. Still, Masiello and others doubt the state would give such powers to an oversight panel. No previous control boards nullified union contracts, he said.

Some Council members believe business leaders are having a major influence on decisions being made in Albany. The Buffalo Niagara Partnership, the area's largest business advocacy group, has been aggressively lobbying for a control board. Ellicott Council Member Brian C. Davis Monday accused the Partnership of "continuing to play games to garner control" of the city.

Partnership officials have criticized Masiello's plan to balance the budget by restructuring police and fire services. Even with the $20 million in accelerated state aid that legislators restored to the budget Monday, the city would still need to borrow $29 million to pay for upfront costs linked to the restructurings.

The State Legislature, in passing a new budget last week, balked at a plan by Pataki to let the city borrow in return for devising plans to erase its structural deficit. Lawmakers said the plan was too weak, failing to put any muscle behind efforts to end the yearly trek to Albany in search of a bailout.

It remains unclear whether the mayor will get the full $29 million he says he needs. Some lawmakers are concerned that the borrowing represents a fiscal gimmick known as a one-shot: a burst of cash that merely puts the budget shortfall off for another year.

Lawmakers await the final report from Hevesi, who was asked by the Assembly to take an in-depth look at the city's finances.

Assembly Majority Leader Paul Tokasz, D-Cheektowaga, said Hevesi's findings will determine the need for a control board.

Asked about the findings so far, Tokasz said, "I believe they're going to tell us it's bad. . . . Whether that means a full-blown control board will depend on the extent of the problem that Hevesi uncovers."

e-mail: bmeyer@buffnews.com and tprecious@buffnews.com

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