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The state's top fiscal officer appears extremely skeptical that Mayor Anthony M. Masiello's re-engineering plan will pull the city out of the red any time soon and is preparing to call for a full-blown control board to oversee Buffalo's finances.

The preliminary findings by State Comptroller Alan G. Hevesi's staff show the city deficit ballooning from $20 million in the coming year to as high as $80 million in 2006, according to state officials, speaking on condition of anonymity.

A team of 15 state auditors has been scouring Buffalo's books as part of a "fast-track" review of the city's mounting budget woes. Insiders expect the audit to have a major impact on whether Buffalo will receive more state aid to help restructure police and fire services. The state comptroller's office Thursday declined to release any specifics of its audit work. Thursday evening, Hevesi issued a statement saying that the financial review is continuing and that he intends to consider the policy options this weekend.

"In the meantime, anybody who says they know what I am going to recommend is wrong, because I have not reached any conclusion myself," he said.

But sources in Albany and Buffalo said the preliminary findings paint a bleak picture.

There were other developments Thursday relating to Buffalo's fiscal struggles:

City and county officials are beginning a new round of talks involving a long-debated plan to sell Buffalo's water system to Erie County. The move could provide one-time
revenue of as much as $35 million to $40 million, proponents said.

County Executive Joel A. Giambra warned that channeling more sales tax dollars from Erie County to Buffalo would force the county to raise property taxes and cut services.

The president of the area's largest business advocacy group renewed his call for Masiello to abandon his police restructuring plan.

Hevesi, sources said, also is unimpressed with Masiello's plan to cut costs in the Police and Fire departments by providing upfront cash buyouts to union employees in return for thinning the force and allowing more flexible scheduling.

The comptroller, officials said, believes those cash advances will negate the long-term savings of the plan and not remedy the city's worsening structural imbalance.

Dire numbers

The dire numbers come as state lawmakers consider a plan that could require the county to share an additional portion of its sales tax revenue with the city.

City officials and some union leaders were reluctant Thursday to comment on the state comptroller's analysis, pending its release next week.

Matthew L. Brown, Masiello's communications director, said the mayor is standing by his restructuring plan. "And he continues to emphasize that if there's going to be a control board, it has to be one that fixes the problem and doesn't perpetuate it," Brown said.

Buffalo's acting comptroller, Andrew A. SanFilippo, declined to comment on specifics relating to the state review, but stood by an earlier warning that the police contract is an "expensive deal with a lot of 'ifs.' " While SanFilippo thinks the agreement is an important step toward reform, he said it raises some "very real affordability issues."

Robert P. Meegan, president of the police union, wouldn't comment Thursday on the state's review.

But he warned last month that it would be "devastating" if the state blocks a restructuring that phases in one-officer patrol cars and more flexible schedules. "That will be the end of the City of Buffalo," he said. "Some business leaders and county officials will get their wish."

Partnership position

The region's largest business advocacy group has been aggressively lobbying for a control board. Officials from the Buffalo Niagara Partnership claim Masiello's budget doesn't fix the financial problems, and in fact, would leave the city in a "deeper hole."

Business leaders have criticized the mayor's police restructuring plan, claiming it is built on "high-risk assumptions" that more than 200 officers will voluntarily retire. They also oppose Masiello's push to borrow $29 million to help pay for substantial raises for police officers and other upfront costs.

Earlier this month, the Partnership released an analysis that concluded that Masiello's spending plan incurs too much debt, doesn't produce enough savings from restructurings and could saddle the city with budget gaps that exceed $70 million within several years.

"From our preliminary discussions, the state comptroller's numbers and analysis have reached the same conclusions as our (review)," said Partnership President Andrew J. Rudnick.

Giambra's numbers

At a news conference Thursday, Giambra addressed many of the state's preliminary findings, claiming the mayor's proposed police restructuring would ultimately cost the city $44 million over the life of the police union contract.

Masiello administration officials disputed Giambra's numbers and challenged him to provide a comprehensive cost comparison of his plan to merge the Police Department and the County Sheriff's Department.

Giambra supported the need for a state control board, saying that it would be more likely to enable a Sheriff's Department and Police Deparment merger and allow for overall consolidation of city and county services as outlined in his 1997 No Handout, No Bailout plan.

"I believe that we can best protect the quality of life for city residents through structural reform," he said.

"And I will recommend to any state control board that now is the time to create a long-term solution as we've outlined it."

'Quit crying'

County Legislature Chairman Charles M. Swanick, R-Kenmore, was less enamored of the control board idea, saying that it will make deep cuts without sympathy for citizens' needs or services. Instead, he said he wished city officials would make some hard choices and not shirk their responsibilities.

"They need to quit crying," he said. "They need to quit blaming everybody. They need to quit finger-pointing and do what's right."

The increasing likelihood that Buffalo will soon be under a control board is causing anxiety in some circles.

"It's making some workers jittery, but until we see the report on Tuesday, we really can't comment," said Michael H. Hoffert, the political action director for the union that represents more than 500 white-collar city employees.

Progress elsewhere

While Masiello and Giambra find themselves at odds over re-engineering the Police Department, some apparent progress is being made on another front.

The two leaders have renewed talks on a possible county purchase of the city's water system, Masiello said. Giambra sent a letter to Masiello this week urging him to reject any long-term borrowing to pay for city operating expenses.

Instead, he pushed the proposed merger between the city and county water systems as a way to gain $35 million to $40 million in upfront money and provide access to additional state subsidies. In response to the city's initial objections about the terms of the takeover proposal, Environment and Planning Commissioner Laurence K. Rubin said the county asked an independent consultant to help review and revise the plan.

County officials said the amended plan features several changes favorable to the city, including:

Allowing senior citizens to keep their water discounts.

Not charging the city for its municipal water use.

Allowing the city to keep $2 million of the $4 million it receives each year in general fund revenue, with a gradual long-term reduction in that amount.

Not raising water rates any higher than the city's Water Board would have increased rates.

Even with these changes, Rubin said, the county would remain committed to investing $15 million in upgrades and repairs to the water system every year.

By going through with the water system takeover, the city gains the money and time needed to restructure its government, county leaders said.

Masiello said that while he is encouraged that the county has submitted a revised water proposal, he said city officials have yet to be given specifics.

"This could be helpful, absolutely," said Masiello of the revised water sale plan. "But we need more details. I talked with the county executive this morning. We both agreed that we have to roll up our sleeves and get real. And we need to move quickly."

The mayor stressed that a "one-shot revenue-enhancer" such as selling the water system won't solve Buffalo's long-term problems. Masiello and other city officials have long pushed for a new revenue stream, with most of the attention focusing on trying to get a share of the county's extra 1 percent sales tax.

County officials denounced that idea Thursday, warning that with pressing Medicaid problems, the county would be forced to raise property taxes and cut services.

"The sales tax is a nonstarter," Giambra said.

Swanick added that since all of the county's property taxes are now going to cover Medicaid costs, the county's additional sales tax money is funding most of the discretionary county services people have come to rely on, from parks to sheriff's patrols.


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