Buffalo Mayor Sean Ryan’s administration started dropping bombs in the last couple weeks.

At a Feb. 19 press conference, the mayor let slip he would propose a 25 percent hike in the city’s property tax levy when he submits his first budget proposal, which is due April 15.

Then Ryan announced he was lobbying state lawmakers to allow the city to issue deficit bonds through the Buffalo Fiscal Stability Authority — a.k.a. the control board — to help cover the city’s operating costs over the next couple years without the control board reverting to strict oversight, or “hard,” status. He also wants to boost the control board’s debt limit from $175 million to $500 million. Both measures require changes in the 2003 state law that created the control board.

The reason for the proposed tax hike and borrowing: a structural budget imbalance — that is, the difference between the city’s recurring revenues and predictable costs — that Ryan’s finance department recently has pegged at a minimum of $50 million and, in the worst case scenario, as high as $109 million.

Those are big figures to lob into the months-long conversation about city finances that’s been littered with competing and sometimes contradictory numbers.

Buffalo Mayor Sean Ryan.

Outside of the mayor’s office, virtually nobody in City Hall is onboard with the idea of raising the city’s tax levy by 25 percent. 

No one has yet advanced proposals to cut city expenditures, either.

Fillmore District Councilman Mitch Nowakowski, chair of the Council’s Finance Committee, said each percentage point equates to about $2 million. He said it’s unrealistic to imagine cutting $50 million — or even $25 million — in expenditures for the fiscal year that begins July 1.

“In a word, it would be catastrophic,” he said. “The way our budget is structured right now is already bare bones with minimal service.”

To maintain those services, let alone improve them, Nowakowski said, the city has to “get out of a structural deficit” that’s been more than a decade in the making. 

That’ll require turning the knobs on the only recurring revenue source the city controls: property taxes.

First, the numbers

To explain the need for the tax increase, the Ryan administration last week released a chart describing the deleterious impacts of former Mayor Byron Brown’s stubborn insistence on not raising taxes over most of his 19 years in office. 

By failing to raise the property tax levy to keep pace with inflation — basically 2 percent each year — the city left a cumulative $602 million on the table, according to the Ryan administration’s calculations.

Source: Office of Mayor Sean Ryan.

The property tax levy was $146.3 million in 2006-2007, the first year Brown wrote a city budget. In inflation-adjusted dollars, that would be $235.2 million today. 

The actual tax levy in the current budget year, which ends June 30, is set at $184.5 million. 

A 25 percent increase on that number in the coming year would bring the city closer to, but still shy of, aligning its tax revenue with the rate of inflation.

Brown during his long tenure as mayor was more likely to lower the levy than increase it, as Investigative Post has reported previously. Meanwhile, costs continued to climb at a rate far greater than inflation — thanks largely to the rising cost of health insurance and pension benefits for city employees.

To make up the mounting difference, Brown spent down more than $100 million in savings that the city built up between 2003 and 2012, when the control board was still in “hard” oversight mode. 

Those reserves ran out in 2019, and it seemed like Buffalo’s day of fiscal reckoning had arrived. In June 2020, as the budget year was coming to a close, the city had to borrow $25 million to cover its costs. The Brown administration blamed COVID shutdowns for the shortfall, but the real culprit was years of budgets that inflated revenue projections, understated expenses, and made up the difference with one-shot revenues.

Then in 2021, the federal government slowed the city’s march toward insolvency with $331 million in pandemic relief money. The city used nearly $225 million — plus many millions more accrued in interest on that pot of money — to cover budget gaps. 

Now that money is gone, too. Last year Acting Mayor Chris Scanlon’s administration was compelled to balance the books with $6.8 million from the city’s rainy day fund — by law, intended to be used only in the event of catastrophes.

In the current budget year, which ends June 30, the city will have spent $703 million, according to the most recent cash-flow projections by the city comptroller. Revenues are expected to finish at $678 million. That figure does not include the promise of $40 million in additional state aid the Ryan administration wrested from the governor last month — $30 million to help balance the books on the current budget, $10 million towards next year’s spending plan.

It does include $26.5 million from the sale of four city parking ramps to a newly created parking authority — another one-shot source of income. 

Without the parking ramp sale and the extra state aid, there’s a $50 million difference between revenues and expenditures. That’s the gap a 25 percent tax hike aims to fill.

Fred Floss, the control board’s secretary and longest-serving appointee, said restoring structural balance to Buffalo’s finances will be a “painful process” that will take years. It will definitely require a tax hike, he said. It may require both the sale of the parking ramps and deficit bonds.

“The longer you wait to raise revenues, the harder this problem is going to get into the future,” he said.

So what can be cut?

The city budget process works like this:

• The mayor drafts and submits a budget to the Common Council. It’s due April 15. By law, it must be balanced, at least on paper, when adopted by June 8. 
• Lawmakers, by simple majority vote, can accept the budget as is or make changes — but only to expenditures, not to revenue projections.
• If they make amendments, the mayor can accept the changes or veto them.
• If the mayor vetoes the amendments, the Council can override with a two-thirds vote.
• If the Council makes no amendments, or if it fails to override a veto, the mayor’s proposed budget passes into law.

Basically, that means if Ryan and the Council — and if the Council can’t agree amongst themselves — the mayor will have his way.

Niagara District Councilman David Rivera, a Ryan ally, called a tax hike “inevitable,” but said lawmakers have an obligation to push for spending cuts, as well as exemptions for the city’s poor and elderly homeowners.

“We can’t let the full burden of our past budgeting mistakes fall just on the taxpayers, especially the most vulnerable,” he said. “There has to be some pain on our part, too.”

In the current fiscal year, nearly $500 million of the projected $703 million in projected spending goes toward personnel:

• Salaries: $292 million.
• Health insurance for active employees: $75 million.
• Health insurance for retirees: $58 million. 
• Payments into the state pension system: $71 million.

The city paid a little over $36 million in debt service, which can’t be cut. The city also sent about $71 million to the school district. That number hasn’t changed in years.

That leaves about $100 million for everything else — outside contractors, utilities, supplies, fuel, capital improvements, the cost of settling lawsuits. There are savings to be found in those categories — and possibly, over the long term, in health insurance costs — but not $50 million worth.

People and programs

Real cuts will mean programs and people, according to Floss, the control board secretary. 

“You can always cut money,” he said. “Whether or not that’s reasonable, or whether or not it’s going to have real negative impacts going forward, is the question.”

The biggest cost centers in the city are, in order, police, fire and public works. No elected official is yet suggesting layoffs in those departments, which are considered essential services. Police and fire are especially difficult to cut, because by contract they have minimum staffing levels per shift, which translates to a minimum number of employees available to fill those shifts. 

Rivera said nonessential workers — including mayoral appointments — should be on the chopping block. Among the executive staff likely to attract lawmakers’ attention are Ryan’s four deputy mayors, each earning $200,000 a year — compared to two deputy mayors under Brown and one during Scanlon’s 14-month tenure. Scanlon’s deputy mayor made $148,000.