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Facing $21 million shortfall, Council freezes spending

Alarm bells sounded in City Hall on Monday as the city controller warned that the state's ongoing dispute with the Seneca Nation of Indians could leave the city with a $21 million cash shortfall at year's end.

"This needs to be addressed now," Maria Brown told the City Council. "This is a major financial problem, and we need to address why we have no casino funds."

After Brown's warning, the Council voted unanimously to freeze discretionary spending throughout city government and vowed to push the state to release the funds, which have been paid into an escrow account since 2010 as the state and Senecas fight over gambling and other issues.

"We have no money to spend," said City Council Chairman Sam Fruscione. "The spending will stop now."

Along with the state, the city receives a portion of slot machine revenues from the Seneca Niagara Casino. It has not received those revenues since 2010 and has instead been funding debt payments for its new police station, economic development projects and infrastructure improvements with its reserve fund and special-projects fund balance.

The special-projects fund balance and surplus fund balance, which swelled to $20 million in January 2011, has since dwindled to $9.3 million. But because the city spent $15.3 million in casino-funded projects with that money, the city now has a cash shortfall of $5.9 million, Brown said.

"As much as we look good on paper, there's no money in the bank," she said.

This year, the city budgeted $6.3 million in casino revenues for debt payments and community development salaries, and Brown said if the city does not receive the funds by year's end, it would have a cash shortfall of $21.6 million.

As a result, the city's ZOOM code enforcement team may not run this year, dozens of streets may not get paved, and some vacant housing may not be demolished, city officials said.

"We've been able to jump-start [city improvements] for a short period of time, and just as the turnaround has started, the key to that funding dries up," said Mayor Paul A. Dyster. "You can't have that large of a shortfall in any fiscal structure there are going to be impacts from that."

Dyster said the city has attempted to budget small amounts of casino revenue spending each year and has built up a surplus that allowed the city to survive fiscally to this point.

"We tried so much as was possible, with some exceptions, to avoid treating casino revenues as recurring revenues," the mayor said.

He said his administration has been in contact with Gov. Andrew M. Cuomo's administration and Seneca Nation of Indians President Robert Odawi Porter.

Fruscione said State Sen. George D. Maziarz, R-Newfane, has guaranteed he will try to get city officials a meeting with the governor. The city is also working to form an unpaid lobbying committee that includes former Assembly candidate Gary D. Parenti and Laborers Local 91 business manager Dick Palladino to attempt to get the funds from the state.

City officials estimated the state could owe the city as much as $50 million in unpaid casino revenues.