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There's a new problem for Niagara Falls: too much money and not enough time to spend it all.

City Council members learned Monday that the city must spend $2.5 million by Monday or be penalized financially by the federal government.

The problem stems from unexpected funds from the $3 million sale of Niagara Splash Park -- which went to the city's Community Development Department -- that may cause the city's line of credit with the U.S. Treasury to go over its end-of-year limit.

"This was unforeseen by us, and we're trying to make the best of it as we can," Community Development Project Administrator Robert Antonucci said during what was supposed to have been a budget work session focusing on his department's proposed expenditures for 2005.

By federal regulation, his department cannot have more than 1 1/2 times the amount of that year's community development block grant -- about $3 million this year from the U.S. Department of Housing and Urban Development -- in the U.S. Treasury 60 days before the Dec. 31 end of the city's fiscal year.

The department has $7 million in unspent funds and needs to lower that to $4.5 million by the end of October, officials said.

The federal "timeliness test" is a requirement that forces money to be spent instead of earmarked for projects that never happen, he said, and is something the city and his deparment need to look at more closely in the future. If the city fails that test in HUD's estimation, it could be penalized.

There had been confusion during last year's sale over whether the money counted under that rule, Antonucci said, and while each dollar of it was approved for various projects in May, many of them have not happened yet.

"They (HUD) could look at the amount of money that does not meet a timeliness test and sanction a percentage of that," he said after Monday's meeting.

Antonucci was notified of the situation Oct. 15 and was able to use $1.2 million last week to pay bills, he said.

His plan for the rest of the money includes establishing a revolving loan fund with about $1.3 million being drawn out of the U.S. Treasury and going into a high-interest account in the city's name to be used for approved community development block grant activities.

He also asked the Council to approve removing $268,843.36 from a line in Community Development's budget, an amount unspent since 1999, to reimburse the city for milling and resurfacing roads.

The city had used casino revenue for that resurfacing.

The Council is expected to approve the proposals at 4 p.m. at the start of today's budget work session in Council Chambers.


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