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Niagara Falls faced with $7.6 million deficit

NIAGARA FALLS – City lawmakers got another perspective Monday on the city’s difficult financial situation.

The City of Niagara Falls racked up a $7.6 million deficit last year, according to the results of an audit presented by the city’s outside auditing firm.

The deficit was almost as large as the nearly $7.8 million hole the city had in 2011. It marked the third time in the last four years that spending outpaced revenue, according to a report presented to the City Council by the Bonadio Group.

The available savings that remain in the city coffers has dwindled to roughly $3.6 million as of the end of last year. Since the city government has been using just under $4 million a year, on average, to balance its budget in recent years, the city should be focused on looking for new sources of revenue, said Randy Shepard, a certified public accountant and partner in Bonadio.

“So having $3.6 (million) at the end of 2014 puts you in a delicate situation going into ’15, ’16 and beyond,” Shepard said.

The fund-balance issue is “one of the long-term challenges” facing the city’s general fund, he said, noting that overall revenues were down about $4.5 million over 2013, primarily because of a drop in aid from other levels of government.

The city’s struggling financial position has been well documented, so the audit results should not have been a total surprise to lawmakers.

In developing a spending plan for this year, city officials wound up using $4.9 million to balance a budget that increased spending and raised taxes.

From 2010 through last year, the city’s property tax revenues remained relatively stagnant, rising only about 8 percent over that time, which is below the rate of inflation, Mayor Paul A. Dyster said.

The mayor also said the city’s personnel expenses rose by 25 percent over the same time period, while overall expenses only grew by 11 percent.

Dyster offered an explanation about how the differences in growth happened.

“We’ve gone through this budget over and over again, looking to reduce operating expenses for departments,” he said, “and basically cut everything else to the bare bone.”

One of the sources of new revenue the city is looking at is from parking fees for on-street parking. The Dyster administration has been working on a plan for new parking meters downtown, although the plan has not been very warmly received by Council members.

Councilman Charles A. Walker said the city should look at doing a property reassessment instead of raising taxes.

When a tax increase is considered, people often ask about the level of services the government is providing, Walker said.

“There’s a lot of things we need to take a look at as far as making things cost-effective” other than just talking about tax increases, he said.

Assessor James Bird told the Council that, based on a state survey, some commercial properties are assessed at around 60 to 65 percent of their full value, while some residential properties are assessed at closer to 90 percent of their full value.

Council Chairman Andrew P. Touma said he agreed with Walker’s perspective about a reassessment.

Touma said he was looking forward to recommendations coming from the Council-appointed financial advisory panel, made up of city residents and empaneled to offer suggestions to lawmakers on fiscal matters.

In another matter, lawmakers unanimously approved a change order in a contract with Stantec Consulting Group, a Rochester firm, to complete design work for a potential extension of John B. Daly Boulevard northward to Pine Avenue. The project has been in the works for years, with the original contract having been approved in 2004.

The Council also approved a change in the development agreement with the Hamister Group that reflects previously announced changes to the features of the $35 million Hyatt Place hotel project planned at 310 Rainbow Blvd. Lawmakers, by a 4-1 vote, also allowed Dyster to terminate an agreement with JD Gifts Inc., which currently operates a parking lot on the property, once a building permit is issued for the project.