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Niagara Falls faces an austere future unless it can undo years of mistakes

For as long as anyone can remember, Niagara Falls has had trouble making smart decisions. Politics, stubbornness, greed and even corruption have helped turn the city with the famous name into a financial and economic disaster zone.

State Comptroller Thomas P. DiNapoli didn’t use those words in his just-released audit of the city’s finances, but he could have. He acknowledged that the standoff between the state and the Seneca Nation of Indians has hurt the city – depriving it of an estimated $60 million in revenue due from the Seneca Niagara Casino – but then he took his fist out of the velvet glove: “While the city has been significantly affected by the casino revenue impasse, its financial condition has worsened significantly due to its budgeting practices.”

The audit noted that the city abandoned multiyear budgeting in 2010 – the moment it was no longer required to do so as a condition for receiving state aid for municipalities. For a city so deeply distressed for so long – even before the casino controversy – that was a foolish decision. If Niagara Falls – or any municipality, for that matter – needs anything, it’s a realistic long view of its finances. It should return to multiyear budgeting voluntarily.

More difficult to resolve is its reliance on one-shots, particularly its use of a dwindling rainy-day fund. With a declining population, a high rate of unemployment and the loss of casino funds, the city has been draining its reserves and surplus money from capital projects. The city’s economy isn’t growing and, given the other circumstances, increasing taxes is also difficult.

Still, as the comptroller’s audit notes, there are things the city could have done to acknowledge the reality of its situation. First and foremost, it should have acknowledged the loss of casino revenues in its budgets as the dispute dragged on. There still is no resolution in sight. The city should officially assume that money is not coming any time soon, and plan accordingly.

As the audit noted, the city needs the state and Senecas to resolve their argument, but, even then, the city will likely need state support. That’s hardly a prognosis for financial health.

DiNapoli didn’t mention it specifically, but with the city’s reserves rapidly dwindling and Mayor Paul A. Dyster noting the need for multiple years of austerity, it is not hard to envision the day when the state appoints a control board to oversee the city’s finances.

The city may or may not be able to avoid that development. Financial circumstances over which it has no immediate control are plainly leading in that direction. But the city’s own decision-making – lack of multiyear budgets, continued expectation of phantom casino revenues – is hastening the slide into crisis.

City officials need to view the comptroller’s audit as a shot across the bow – a warning that it needs to do things differently to protect the city’s interests. In the meantime, the state needs to resolve, as quickly as possible, the dispute with the Senecas but also to continue closely monitoring Niagara Falls finances for signs of further trouble.