May 3
2024
Buffalo’s precarious budget
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Buffalo Mayor Byron Brown struck a pragmatic tone Wednesday as he introduced his budget proposal for the coming year, which is balanced with a 9 percent hike in property taxes and nearly $15 million in reserve funds.
The mayor’s $618 million spending proposal, however, suffers from some of the same unrealistic revenue projections that led to shortfalls in the past, before the city’s treasury was bursting with federal pandemic aid to conceal the difference.
Consider just three revenue sources the Brown administration has frequently overestimated in past budget cycles: parking meters, parking tickets, and traffic fines.
- Parking meters are forecast to bring in $4.9 million in Brown’s 2024-25 budget proposal. For the current budget year, this revenue line was far lower, $2.9 million, and the comptroller’s most recent cash flow report and third-quarter budget analysis project the total for the year will fall short of that goal.
Bottom line: The Brown administration is forecasting more than twice as much money from parking meters as the comptroller expects the city to get from this year. The shortfall could be more than $2 million.
- Parking tickets are expected to yield $5.75 million next year — up a quarter million over the current budget. The comptroller estimates the city’s total take this year will be $4.4 million.
Bottom line: Parking ticket revenue is likely to be more than $1 million under budget this year, but Brown’s budget raises the budget line anyway, risking a similar deficit.
- Traffic fines are budgeted to produce $4.25 million in revenue, the same amount as the current year. But the comptroller expects the city will actually bring in about $3.4 million in fines.
Bottom line: This budget line, too, could result in a deficit close to $1 million.
Mayor Byron Brown. Photo by Garrett Looker.
Taken together, Brown’s budget proposal relies on those three revenue lines to produce $4 million more than the comptroller expects they’ll generate in the current year.
That may not seem like a lot in a $618 million budget, but every dollar that doesn’t actually materialize has to be made up elsewhere.
There are other suspect revenue projections. For example, the city’s share of the county sales tax is predicted to come in nearly $3 million less than expected when the current budget year closes June 30. Nonetheless, Brown has increased this budget line by $2 million.
That sets up an additional $5 million shortfall, if sales tax revenue stays the same.
Smaller disparities between revenue performance in the current budget year and the mayor’s budget proposal for the coming year could also contribute to a deficit. Casino revenue, income from grants, cannabis tax, rental registration fees — all are forecast to yield more money than the comptroller expects the city will get out of them this year.
The end of pandemic aid
Over the last three years, such imbalances have been masked by federal pandemic aid, specifically a pot of $331 million the city received in 2021 through the American Rescue Plan, or ARP.
The city has already used or earmarked about half that sum for “revenue replacement,” which sticks the money in the city’s general fund instead of committing it to a particular program or project. That use of the federal relief funds has enabled the Brown administration to balance its last three budgets without the use of savings, as it did in eight of 12 budget cycles since the city’s state-imposed financial control board switched to an advisory role in 2012.
In the years between the control board going “soft” and the influx of federal pandemic aid, the Brown administration used more than $100 million in city reserves to balance budgets, while steadfastly refusing to raise property taxes.
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By 2019, the reserves available to plug budget gaps were entirely depleted. That compelled the city to take a short-term, $25 million loan in order to close out the pandemic-ravaged, 2019-20 budget year, because the city’s savings accounts were empty.
Pandemic aid helped to pay off that short-term loan. And the city’s reserves have since been replenished, thanks to federal covid money and a fund balance maintenance policy adopted by the Common Council in 2021.
But the pandemic aid must be obligated — that is, earmarked and under contract — by Dec. 31 of this year, which means it can’t be used to plug budget holes in the second half of the city’s upcoming fiscal year.
As a result, Brown’s spending plan turns again to the city’s savings, relying on $14.9 million in reserves to balance the budget.
That’s on top of that proposed 9 percent tax hike, which the mayor says will generate $14 million in new revenue for the city.
For a homeowner with a house assessed at $200,000, that tax hike translates to an extra $156, or an additional 78 cents per $1,000 assessed value. Separately, that homeowner can expect to pay an extra $30 for garbage pickup next year.
The rate increase for commercial property owners is higher — an additional $2.32 per $1,000 of assessed value. That means the owner of a $200,000 commercial property would pay an extra $464, plus an average increase of $40 in garbage fees.
The Council passed a measure Tuesday permitting the city to surpass the state-mandated 2 percent annual cap on property tax increases.
The vote was 6-3, with the North District’s Joe Golombek, Niagara’s David Rivera and University’s Rasheed Wyatt arguing it was premature for the Council to approve a tax cap override before seeing the budget, which was not released until the next day.
Costs going up and up
With two months left in the current fiscal year, expenses are running $22.3 million higher than expected, according to the city comptroller’s third-quarter budget analysis.
Much of that overrun is attributable to the $43 million settlement of a lawsuit resulting from a police officer striking a pedestrian with his patrol car in 2020.
The Brown administration took out a short-term loan to pay that settlement, which will cost the city about $10 million per year in debt service over the next five years.
It’s not just that big lawsuit settlement, though. According to the comptroller’s latest budget analysis, the police department is running about $6 million over budget, thanks in part to a new contract that included retroactive raises. The Department of Public Works is running $5 million over, in part due to unbudgeted snow removal expenses. And the comptroller expects the fire department will finish $4 million over budget, due primarily to overtime.
Brown’s 2024-25 budget proposal increases funding for all three departments, which between them consume about 45 percent of the city’s budget.
- The police department is expected to cost $109.2 million next year, an increase of $14.5 million over the current year.
- Public works is allotted $41.4 million, an increase of $4.1 million.
- Fire is budgeted at $72.9 million, an increase of $2 million.
The Council is empowered by the city charter to change expenditures in the mayor’s proposed budget, but not revenue projections. Several Common Council members have indicated their intention to reduce the mayor’s proposed spending in order to achieve a smaller tax hike.
To do so, they’ll most likely have to aim their cuts at police, public works and fire, because that’s where the bulk of the spending is.
At the same time, they’ll need to be mindful of those projected revenue streams that might not add up a year from now.
The Council began its schedule of budget hearings and workshops on Thursday. There will be a public hearing on the budget in Council chambers on May 15 at 5 p.m. The Council must accept the mayor’s budget or send him back an amended proposal the following week, per the city charter.
A final budget must be in place by the first week in June.
