Buffalo's control board has added its voice to that of the comptroller in raising concerns about a city budget that counts on revenues that may not come in as projected, including casino compact money and funds from a new entertainment surcharge and a charitable giving plan that the IRS has raised questions about.
But the Brown administration says not to worry; first quarter figures have them projecting a $440,000 surplus for the current fiscal year.
“We’re going to be probably at budget," with $509.81 million in revenue and $509.37 million in expenses, said Donna J. Estrich, the city's commissioner of administration, finance, policy and urban affairs.
And year-to-date revenues at the end of October show the city was at 34 percent, “which is right where we should be at the end of one-third of the year," Estrich said.
The picture painted by the administration stands in stark contrast to Comptroller Mark J.F. Schroeder's warnings last month of a projected $28 million shortfall in expected revenues so far this fiscal year, a warning that Mayor Byron W. Brown's administration called "irresponsible" as the former mayoral primary foes clashed over budgetary policy that Brown says is his prerogative alone.
Now the administration’s first-quarter report for 2018-19, as well as Schroeder's own October cash flow report, show good news about the city's finances.
For instance, sales tax revenue is trending 7 percent higher compared to the first quarter of last year, and "year to date, we’re conservatively projecting to be $600,000 higher than where we were last year," Estrich told Common Council members recently.
- Schroeder's revised projections show that $1.5 million he requested be set aside for interest for short-term borrowing is not needed after all for December and January, because the city doesn't have to borrow right now.
- The city also is spending $8 million less than projected on pensions as of the October cash flow report, a comptroller's spokesman said.
- Health care and dental care for active and retired employees is trending $1 million to $1.6 million less than projected, Estrich said.
- And the new firefighters union contract will cost about $1.7 million in salaries rather than the approximately $2.35 million that had been projected.
So, does all of this mean the comptroller was wrong to raise earlier warnings? Schroeder's office says no, and that school district finances are making the city's fiscal picture look better.
“Some of the things that we’ve been flagging are still not in: casino revenue, real estate sales, the entertainment surcharge, charitable gifts and donations, and revenues from traffic violations are low,” said Schroeder spokesman Patrick J. Curry. “So far we’re right about all of those things. The reason that cash flow looks a lot better is because of the school district.”
The city has a joint bank account with the Buffalo Public Schools, which has about a $1 billion budget, while the city’s budget is about $500 million, Curry said.
The school district’s financial picture “is doing better than what was projected back in May,” he said. And that bodes well for the city.
“So when they are having a good day and are doing well, that helps us. It’s nothing the city did. It’s by virtue of the fact that we share a bank account with the school district. If we didn’t have them, we would have had to borrow a year ago,” Curry said. “When we’re out of money, we’re using their money to pay the bills, which is how we didn’t need to borrow for December and January.”
And other concerns about the city's finances remain. For instance, when the Buffalo Fiscal Stability Authority recommended approval of the city's proposed labor agreement with the firefighters union, it repeated the comptroller's earlier worries about certain revenues not coming in at the budgeted amounts.
That includes $17 million in casino revenue from the Seneca Nation, which has claimed it is no longer obligated to make the payments, though the two sides are in arbitration. Another $2 million would come from a new ticket surcharge — which critics call an illegal "tax" — at five major entertainment venues that is still being haggled over.
The administration also projected $2 million in revenue from a charitable giving plan for wealthy taxpayers to circumvent the impact of the new federal tax law, though a control board official said IRS guidelines issued last summer make that idea "dead in the water." However, administration and control board officials say the city is not projecting a negative impact from the IRS ruling because 99 percent of the budgeted amount will come from donations from organizations and businesses, not wealthy individuals.
The city's savings account that can be used to balance budgets had a zero balance at the start of the fiscal year July 1. “That has been fully depleted,” leaving no ability to use that account to fill future gaps, said BFSA Executive Director Jeanette M. Robe. She added that another account — which can only be used for specific expenses, not for balancing the budget — also has shrunk from $35 million to $13 million.
Other areas of concern in the first quarter report include:
- The administration budgeted $6 million in traffic violation revenues for the current fiscal year, but only $711,000 has come in, though officials call that a "timing issue," citing a delay in payments from Albany.
- It also budgeted $8 million from the sale of city-owned real estate but nothing has come in so far, though one sale for $1.3 million is being reviewed by the city's Law department, Estrich said.
- The tax paid by utility companies is down by about $400,000, though the city expects those payments to increase.
Nevertheless, the administration report — while acknowledging that revenues currently are trailing projections — expresses confidence that city income "will accelerate," calling their forecasts "conservative."
"We're pleased with the first-quarter numbers, and we will continue to work to achieve our financial projections," said administration spokesman Michael J. DeGeorge.