May 10
2019
Mayor Brown’s risky budget assumptions
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There is little fat in Buffalo Mayor Byron Brown’s proposed 2019-2020 budget, as befits a city where, despite aspirational talk of a renaissance, population is stagnant and job growth and real wages trail national averages.
However, that word aspirational also applies to some projected revenue streams on which Brown’s budget relies. Other words and phrases come to mind, too, such as tentative, maybe, never going to happen, and zombie.
Below is a quick look at some of those revenue projections, totaling about $20 million of the $508 million budget.
(Today, the office of interim City Comptroller Barbara Miller Williams released its response to the mayor’s budget. The comptroller’s staff found $21 million in questionable revenue projections, as well as some shaky appropriation lines. You can read that here.)
That doesn’t sound like a lot of money if you say it fast enough, but bear in mind that the Brown administration has spent down the city’s reserves over the last several years to fill gaps left by previous unrealistic budgeting. There is effectively no reservoir of cash available to fill gaps, should these proposed revenues fail to materialize.
City-owned real estate sales
The city’s 2018-2019 budget projected $8 million in revenue from the sale of city-owned real estate. To date, with the close of the fiscal year less than two months away, the city has earned $914,000 from such sales.
Nonetheless, this year’s budget once again forecasts a substantial haul from property sales, $6.9 million — $5.3 million more than the city has earned on property sales in any recent budget year.
That number includes a tentative $1.7 million deal to sell the crumbing, city-owned parking lot at Gates Circle to TM Montante. The ramp and a swath of surrounding real estate in the middle of one of Buffalo’s most prosperous neighborhoods was recently declared blighted by the Common Council, enabling the developer to seek tax abatements for its stalled project on the former Millard Gates hospital site.
But tentative is the operative word here. Those tax abatements might not be approved, the attendant financing never materialize. The parking ramp might continue to molder.
More importantly, every previous year’s actual reckoning suggests this projection is at least $5 million past prudent.
Casino revenue
Because New York State and the Seneca Nation of Indians have been at loggerheads about the terms of the casino compact — who’s breaking it, and how much the Nation owes — the city has received no casino revenue since the 2016-2017 budget. That year, when the original 14-year casino revenue sharing plan ended and the squabbling began, the city’s share was $3.4 million; the previous year the city received $7 million.
Since then, nothing. Still, the city continues to budget that revenue. Last year’s budget projected $17 million in casino revenue; the city, so far, has received nothing. If that $17 million doesn’t materialize before the June 30 end of the city’s fiscal year, the city will have to find a way to plug the hole.
Geoff discusses the city budget on WBFO’s Press Pass
The 2019-2020 budget projects $11 million in casino revenue, which one might be tempted to praise as $6 million closer to reality, if only reality weren’t likely still $11 million away.
It is true that in April a court arbitration panel ordered the Seneca Nation of Indians to cough up $255 million in casino revenue to New York State, which would then piece out some of that money to the cities of Buffalo and Niagara Falls. It is also true that the Seneca Nation of Indians doesn’t give a damn what a New York State arbitration panel tells it to do. The Nation has requested a federal review of the 2002 casino compact to determine its obligation to New York State going forward.
Maybe the Department of the Interior will decline to perform such a review; maybe that understaffed, underbudgeted, and rudderless federal bureaucracy will perform a review speedily and order the Seneca Nation of Indians to pay up; maybe the Seneca Nation of Indians won’t find some other way to challenge or postpone sharing its casino revenue.
But maybe is a pretty poor basis upon which to write a budget, especially for a cash-strapped city that has no available reserves to patch an $11 million hole.
Entertainment ticket fee
The city proposes to collect a surcharge on tickets sold to cultural events at five venues: Shea’s, Kleinhans, KeyBank Center, Canalside, and Coca-Cola Field. The surcharge would be applied on a sliding scale, based on ticket price, ranging from 50 cents for tickets costing $10-$25 to $3.50 for tickets costing $75 or more. The Brown administration has projected $752,000 in revenue from this new fee.
Making predictions in politics is a fool’s game, but I’ll be that huckleberry: The entertainment ticket fee is never going to happen, not because it’s a terrible idea — terrible ideas are made reality all the time — but because the patrons and boards of directors of the city’s arts and cultural institutions will rebel.
Indeed, the rebellion is already afoot, as illustrated by a strongly worded letter from a partner at a major downtown law firm, Phillips Lytle, retained by Shea’s to fight the proposal. That letter lays the basis for legal action to overturn the proposed legislation (e.g. the lease the Buffalo Sabres have on First Niagara Center explicitly prohibits a ticket tax), which has not yet been passed into law yet anyway, which brings to mind the maxim against counting chickens before they hatch.
AirBnB registration fees
On to another, smaller nest of unhatched eggs.
Brown’s proposed budget projects about $250,000 in receipts from a fee to be collected from AirBnB hosts in the city. The proposal to regulate the growing industry would require hosts to submit to annual property inspections, for which they would pay a fee of $150 or $250 per listing, the price depending on the scale of the operation.
The notion of crafting regulatory legislation for the AirBnB industry has been tabled in the Common Council’s Legislation Committee for about two years, but last month two council members, Joel Feroleto of the Delaware District and Chris Scanlon of the South District, pushed for a quick vote to approve a law they’d drafted without public input. AirBnB hosts mobilized quickly and lobbied to have the legislation sent back to committee, so that they could take part in its drafting and implementation. The AirBnB folks succeeded in that.
Then they turned out in force at Tuesday’s Legislation Committee meeting, where councilmen took turns avowing their support for the city’s AirBnB community and their determination to engage that community in drafting a new law that recognizes the diverse economic realities of the city’s hosts.
Indeed, Council President Darius Pridgen dropped in on the Legislation Committee meeting specifically to voice his assurance that the AirBnB community would be heard as the legislation was crafted.
“I’m an AirBnB fan. I’m an AirBnB junkie,” Pridgen said, then borrowed a metaphor from a AirBnB host who’d pleaded with the Council to take a slower, more studied approach: “We will not use a cannon to catch a mouse.”
Scanlon back-pedaled, agreeing that the proposed legislation could be revised with public input. Feroleto said nothing. The hotel owners and operators pushing for the new regulations — who lose nights to AirBnBs, and who pay taxes and are subject to regulations that AirBnB hosts do not currently deal with — will have to wait.
So will the city budget. It doesn’t matter if $250,000 is the right amount for the city to expect new regulations to yield. There is no legislation yet, at least none the majority of the Common Council will pass.
Zombie property fees
And speaking of budget lines for which no legislation yet exists, consider this: The city is projecting $2 million in revenue from banks that control so-called “zombie properties”: These are properties that have been foreclosed upon by banks, which, unwilling to invest in their upkeep and unable to sell them, allow them to remain vacant, blighting nuisances.
The city hopes to impose a fee on banks that zombify properties, and the Brown budget projects $2 million in revenue from that fee.
But there’s no law in place yet that levies such a fee. Such a law might be beyond the purview of the mayor and the Common Council to enact; it might require an act of the New York State Legislature. In any case, it doesn’t exist now except in the mayor’s revenue projections.
It is, in effect, a zombie line in a budget that — thanks to prodigal use of reserves to offset the rosy and ultimately erroneous revenue projections of past budgets — has no room to indulge in fantasies.
There is one number in the mayor’s proposed budget that is beyond guesswork: New York State aid will subsidize the City of Buffalo’s operations, as it does every year. That money — $161,285,233, or 31.7% of the city’s total budget — you can take to the bank.
