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CONTROL BOARD LOOMS EVER CLOSER TO REALITY

Buffalo is preparing for what some see as a long-awaited savior and others view as an unwelcome intruder -- a financial control board with the clout to make drastic changes throughout the city.

The idea of a state board overseeing almost every aspect of Buffalo's finances, from how much it spends to how much it borrows to how much it taxes property owners, was once considered far-fetched, even outrageous.

Today, it seems certain, state legislators say.

"I can't disagree with that," said Assembly Majority Leader Paul A. Tokasz, D-Cheektowaga. "All indications are that, barring some financial development, a control board is as close to inevitable as I have ever seen."

No one is sure how much power a control board might wield here, what its makeup might be or how long it might serve as Buffalo's fiscal watchdog.

But Tokasz made it clear that Buffalo's control board will have the same type of power and authority as those that served in New York City, Troy and Yonkers.

One business leader said he understands that the state is considering a panel that would closely resemble the one that oversaw New York City's finances in the mid-1970s. That panel had the power to both control spending and borrow money.

The only thing that seems certain is the state's desire to create a control board with the power to oversee and hopefully remedy the fiscal crisis engulfing its second-largest city.

"A fiscal control board is inevitable," said Assemblyman Sam Hoyt, D-Buffalo. "In fact, I believe a very strong fiscal control board is necessary for the City of Buffalo."

Just how strong remains to be seen. Even Hoyt, who expects to sponsor the legislation creating a control board in Buffalo, is unsure how much power the state board should have over city finances.

Ultimately, the board's role, power and makeup will be dictated by state lawmakers, the only ones with the authority to create a local control board.

One of the biggest players in drafting that legislation will be State Comptroller Alan G. Hevesi. State lawmakers are expecting Hevesi to make a recommendation, maybe as early as this week, on what type of board can best help Buffalo get its fiscal house in order.

Through the years, only three cities in the state -- New York City, Troy and Yonkers -- have been subject to control boards. In most cases, the state gave those boards the ability to veto municipal budgets, impose wage freezes, approve contracts and certify annual revenue estimates.

The one area where the boards relinquished authority to local officials was in policy decisions or, more specifically, how the city spent its money.

In Buffalo, a control board would probably give Mayor Anthony M. Masiello and the Common Council the ability to draft an annual budget but reserve the right to reject it if the budget is out of balance.

New York City's board

"I believe the number and the sharpness of teeth that the control board will have is much greater today than it would have been 10 days or two weeks ago," said Andrew J. Rudnick, president of the Buffalo Niagara Partnership.

Rudnick said he understands that discussions are under way in Albany about the makeup of the control board, which he expects to be in place by July 1.

He said state officials, at this early stage, appear to be leaning toward a board modeled after the one that oversaw New York City's fiscal recovery.

When New York got in trouble during the 1970s because of excessive borrowing, the state created a control board that curbed spending and an agency, the Municipal Assistance Corp., that had the power to borrow money and keep the city from going bankrupt.

"The New York experience was superb," said Edward V. Regan, the former state comptroller and former Erie County executive who served as chairman of the Municipal Assistance Corp. for six years. "There is no question it worked very well in New York City."

Sources said one scenario under consideration for Buffalo is a control board consisting of nine members, with at least five appointed by Gov. George E. Pataki. It also would include appointees from the State Legislature and both the county and state comptrollers.

Control boards in New York State have traditionally resulted from "home rule messages" in which the city requests one. But Rudnick said his sources indicate that such a request may not be necessary this time.

"We think the State Legislature is prepared to move without a home rule message," he said last week.

Power with limits

To understand how a control board operates, all you have to do is think of your family's finances.

The next time you pay your bills or balance your checkbook, imagine someone looking over your shoulder with the power to veto your every decision.

Even worse, imagine that person cutting up your credit cards, slashing the household budget and scrapping plans for that special summer vacation on Cape Cod.

Once you have done that, you have an inkling of how a control board operates.

Yes, it can have tremendous power, including the ability to freeze public employee wages, but there also are limits to what it can do.

Historically, one of the biggest limitations has been labor contracts. There has never been a state control board with the power to abolish collective-bargaining agreements -- not in New York City, not in Troy and not in Yonkers.

Rudnick thinks that this may change and that Buffalo's financial control board will have unprecedented powers.

City officials don't buy it. In fact, Buffalo's finance commissioner, James B. Milroy, dismissed the idea as politically impossible, given the influence of public employee unions in Albany.

If that happens, Milroy said, "it will be the first time in the history of the world that the State Legislature created a control board with the ability to abrogate contracts."

Dealing with unions

The control board's power in dealing with unions is important because Masiello and others contend that one of the keys to solving the city's fiscal woes is reducing the cost of employee fringe benefits, most notably health insurance and pensions.

State officials say the mayor's goals can be addressed by using wage freezes and layoffs to bring the union back to the bargaining table.

Ultimately, the question is whether a control board can do enough to restore the city's long-term fiscal health.

In short, what good might come out of this?

Carries benefits

One of the likely short-term benefits is an improved outlook by Wall Street. That is no small feat, given Buffalo's recent placement on a credit-rating "watch list," an action that prompted fears of a downgrading in the city's credit rating.

"In the event we have a control board, we have to assume the markets would react favorably," said acting City Comptroller Andrew A. SanFilippo.

The opportunities and pitfalls are numerous and Buffalo, for the first time in its history, is about to confront them. The days and weeks ahead may determine how well the city responds to that challenge.

"There's no such thing as a cookie-cutter approach to control boards," Hoyt said. "Everything is on the table."

Picking up steam

In Albany, the notion of a control board has picked up steam in recent days and now seems certain.

Tuesday, Regan appeared before an Assembly committee and mentioned the likelihood of a control board in Buffalo.

"As we speak, Buffalo, my hometown, teeters on bankruptcy, and there is serious discussion of a financial control board, much like the one that saved New York City from insolvency," said Regan, president of Baruch College in New York City.

The momentum for a control board is so strong that the New Millennium Group, a local organization dedicated to reviving Buffalo, has called for a public forum on the issue.

The group, in a letter to state lawmakers, said a control board seems "inevitable" and could play a role in revitalizing the city. The group's concern is that city residents have a voice in the debate over its formation.

"Who's going to be on it?" asked Jeremy Toth, president of the group. "How are they going to be appointed? How long are they going to be here?"

Toth said the group does not buy into the notion that Buffalo's control board has to be the same as the ones created elsewhere in the state. He thinks that Buffalo can learn from those cities' mistakes and create an even better control board.

"A lot of people say, 'Let's see how Yonkers did it and do it that way,' " he said. "That doesn't make a lot of sense."

News Staff Reporter Brian Meyer contributed to this report.

e-mail: pfairbanks@buffnews.com
and rmccarthy@buffnews.com

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