Mar 19
2020
COVID-19 expected to worsen Buffalo finances
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The coronavirus, and the attendant slowdown of the local economy, could not arrive at a worse time for the City of Buffalo’s finances. The likely decline in county sales tax — Buffalo’s share of which is a critical portion of the city’s budget — could contribute to a deficit when the fiscal year ends June 30.
Early spring is the worst period of the year for the City of Buffalo’s cash flow, as Investigative Post reported last year.
The city comptroller’s office projected the city would run a positive cash flow balance of $3.5 million for February, and that number is likely to hold, according to Delano Dowell, Buffalo’s deputy comptroller.
However, the comptroller’s office projected a negative balance of $12.8 million in March. That’s not to say the city can’t meet its bills now: The Buffalo Public Schools has strong reserves, and the city is custodian of the school district’s funds. In lean months, the city relies on school district reserves to keep accounts in the black.
That projection was made before the state, county, and city emergency declarations that have curtailed economic activity in the city, the county, and throughout the state. The city’s actual cash flow for March, and for months to come, will almost certainly be worse than projections.
The city’s three biggest sources of revenue, in order, are aid from state government, city property taxes, and the city’s share of the county sales tax.
The silver linings, according to Dowell: The city has already collected almost 90 percent of its projected property tax revenue for the fiscal year that ends June 30. And the next state aid payment — the biggest chunk of the year, $98.4 million — isn’t due until June. The other two state aid payments this fiscal year, totaling $62.9 million, are already in the bank.
The cloud: county sales tax. The comptroller had projected the city’s share to be $8.9 million for March. The actual amount is bound to fall short of that, as businesses close and consumers — including Canadian shoppers — stay home.
Some smaller revenue streams, such as parking fees (and parking tickets), are likely to fall short, too. On Monday, Mayor Byron Brown said the city would refund fees and deposits for special events that have been canceled. It all adds up for a city that has struggled over the last decade to make revenues meet expenses.
Those expenses will remain constant, according to Dowell. Police and fire personnel continue to work apace. Some city workers have been asked to work from home, per Governor Andrew Cuomo’s mandate that public and private employers reduce contact between personnel in the workplace. For now, all are being paid.
Last year, the city was saved from a budget shortfall when state government advanced $7.5 million in casino revenue. This year the city is counting on $11 million in casino revenue, despite the continuing dispute between the Seneca Nation of Indians and state government.
If that dispute is not resolved, the state may not be in a position to advance the city that money again. Earlier this week, State Comptroller Tom DiNapoli predicted the crisis would cause state revenues to fall at least $4 billion short of projections, and perhaps as much as $7 billion.
If casino funds do not come through, or if June’s state aid to municipalities is delayed or reduced, the city can tap its rainy day fund of $39 million, which can pay city expenses for 30 days. Those are the only reserves the city has for the task, as the Brown administration has spent down $100 million in savings in the last decade to balance budgets without raising the tax levy.
Fortunately for city government, most of the cost of confronting the crisis falls on Erie County. The county’s Department of Health is spearheading the response, while other departments — such as the Department of Social Services, the Office of the Disabled, and the Office of the Elderly — must create, and pay for, novel ways to deliver essential services to vulnerable communities.
Erie County Executive Mark Poloncarz last week asked the Erie County Legislature to free up $5 million from the county’s surplus to help those causes. The county has a relatively robust $102 million in reserves.
Another question mark is the market for municipal bonds. The city is slated to go to the bond market at the end of April to help finance $25.3 million in capital projects. The market for municipal bonds is not exactly booming right now.
“A lot of people aren’t buying bonds, due to how the market is going,” Dowell said. “The markets are just uncertain right now. I think every municipality is just sitting and waiting. We’re all in the same situation right now.”
That is, hoping for a market rebound by next month. Dowell said the comptroller’s office would have solid measurements of the crisis’s impact on city cash flow — and thus the fiscal year — by mid-April.
