Share this article

Open for business
Find out the latest updates from local businesses as our region reopens.
print logo

City of Buffalo spent school district funds to keep from running out of money

The City of Buffalo didn't run out of money last week, as a city comptroller's report suggested it might, despite a $35 million year-to-date cash deficit.

But it was primarily because the city spent a portion of Buffalo Public Schools money from a joint account to make sure its bills were paid and to keep the city afloat.

Mayor Byron W. Brown's administration said it did not know how much of the district's money the city spent because it does not have access to day-to-day cash balances.

"The city did not run out of money and doesn't anticipate running out of money," said Brown during an editorial meeting this week with The Buffalo News. "We have different periods where cash comes in and cash goes out so at different periods in time, the cash position of the city looks different, but ... you have to take the whole year and the cash projections in, cash projections out and also look at what is actual."

The city's joint bank account with the school district helps the city, particularly with its cash flow. BPS has about a $1 billion budget, while the city's budget is about $500 million.

Both the city and the district use the account to pay bills. The Comptroller's Office controls and manages the joint account.

The city will replenish the school district's portion of the joint account it tapped once $98 million in state aid arrives in June when the city's fiscal year is about to end, said officials within the Brown administration. The $98 million accounts for about 20% of the city's current budget of about $509 million.

The timing of when the two entities receive state aid is why the joint account was set up, according to city officials.

The Board of Education receives state aid monthly, according to sources who work with the city's finances. The city gets state aid three times a year. The city has already received two aid payments of about $63 million for the current fiscal year. The administration is confident it will receive the $98 million payment in June, officials said.

The Brown administration has drawn on the school district's portion of the funds before, and even though the money is paid back, the mayor was criticized for that in December 2018 by the former city comptroller. The practice is an indication of structurally imbalanced budgets, said former Comptroller Mark J.F. Schroeder.

But a timing issue related to cash flow is why the joint account was set up, said city officials. And the Covid-19 health crisis is the main culprit for the city's current negative cash flow problem.

City Comptroller Barbara Miller-Williams' year-to-date financial status report issued last week showed a $35 million year-to-date budget shortfall in the current $508.6 million fiscal budget due to a reduction in general revenues and sales tax receipts, which she attributed to the Covid-19 pandemic.

The $35 million was not a year-end budget deficit projection, Brown said. It was a "snapshot in time" that was given to the Common Council.

The administration found the information and the numbers in the comptroller's report "to be 100% accurate" as of April 22, Brown said.

About nine weeks of revenues and expenses still remain to be recorded in the city's 2020 fiscal year, which ends June 30. The administration is projecting a $15 million fiscal year-end budget gap "completely based on Covid-19."

The city has the option of going to the bond market and issuing a deficit note to borrow up to $25 million at a low interest rate to close the budget gap, city officials said. Another option is for the city to dip into its rainy day fund, which contains $39 million.

The city also may have to resort to "deficit-borrowing" if the $65 million in federal disaster relief money in the proposed 2020-21 budget is not received, Brown said. The federal assistance has yet to be approved by Congress and signed into law. Brown released last Friday his 2020-21 budget proposal of $519 million.

"Buffalo is in strong fiscal position. We have a strong credit rating. We are able to deficit-borrow," Brown said. He pointed to a favorable interest rate of 0.92% the city secured when it went to the bond market on April 16 to borrow $34.8 million in bond anticipation notes.

The bond sale saved the city on debt-service payments and provides funding for capital projects this year.

Story topics: /

There are no comments - be the first to comment