Niagara Falls finds itself down on its luck with casino cash

Falls finds itself down on its luck with casino cash
Lack of funds over past two years is leading to cash flow problem for city
By Mark Scheer
The Niagara Gazette Thu Mar 29, 2012

NIAGARA FALLS — A combination of continued spending and no new casino revenue has put the city of Niagara Falls in a precarious financial position, one that has the chairman of the city council threatening to wrest control of spending away from Mayor Paul Dyster’s administration.

Controller Maria Brown has been asked to provide the council with an overview of the city’s finances during a meeting at 4 p.m. Monday at City Hall.

Brown said Thursday she will be looking to drive home the message that the city has exhausted all the casino cash it had on hand and must curtail spending moving forward as it does not appear as though new revenue will be arriving anytime soon.

“This is my job,” she said. “My job is to bring it to the attention of everybody. I’m not hear to put fear into people, but I’m hear to wave the red flag and let everyone know it’s time we start watching this very carefully.”

With no casino revenue coming in for the past two years, Brown said the city has reached a “critical point,” not only in its ability to support projects and programs funded by casino dollars but in meeting general operating budget obligations for things like salaries and pension payments. She said she will recommend the implementation of a freeze on spending in several areas, including the filling of vacant, non-public safety positions, overtime, employee travel and special projects like the ZOOM community cleanup team.

Brown said the change in direction is needed to prevent the city from running into a cash-flow problem later this year.

“The city has been using its reserves in anticipation of the casino funds coming for a two-year period,” she said. “We now have to say ‘the projects have to stop.’ We are now at a critical point and we need to say ‘nobody can ask for anymore money.’ ”

The controller’s warning follows comments made last week by Lt. Gov. Robert Duffy who said during a visit to Niagara Falls that it may “take awhile” for the casino revenue dispute — which appears headed for arbitration — to be resolved.

Brown said the city can no longer afford to be patient. She said the city spent roughly $15 million in casino revenue since receiving its last payment in 2010. Since then, it has been dipping into its special projects fund balance to cover expenses in anticipation of the arrival of casino revenue. Those revenues are still not here, but Brown says the bills are continuing to pile up. She said the city’s reserve account dropped from $20 million in 2010 to $9.3 million through the first quarter of this year.

“We have done the right things and that’s why we had a $20 million reserve in the bank,” Brown said. “It’s not the city’s fault. The council and the mayor have done everything prudent and have been fiscally responsible. This is a consequence of not getting the money we all thought we would have by now.”

Mayor Paul Dyster added Thursday night that while city officials were prepared for a reduction in casino cash revenue, no one anticipated the city would go two years without receiving any of the funds.

“This is the most unpredictable of circumstances,” he said.

Council Chairman Sam Fruscione disagreed. He suggested Dyster’s administration could and should have done more by now to reign in spending and avoid the prospect of more significant financial problems down the road. He suggested the administration employed a “smoke and mirrors” approach by requesting funds for consultants, special projects, reports and other questionable expenditures without having the casino cash on hand to cover the cost.

Fruscione said he learned the true nature of the city’s finances during a meeting with Brown earlier this month. Without an immediate influx of casino revenue, he said the city may be forced to lay off as many as 100 employees to keep the books balanced.

“We’ve been robbing Peter to pay Paul and now it’s coming back to bite us in the butt,” Fruscione said. “We’re down deep — real deep.”

Dyster disputed Fruscione’s claims, particularly in regard to staff cuts.

“Layoffs are the very last option we’d look at,” he said, later adding, “... we’re going to have to do everything we can to keep cash from going out the door.”

One casino cash-related expenditure the city can’t get away from, Dyster said, is a $4.5 million annual debt service payment related to the construction of the municipal complex, a plan put forth by former Mayor Vince Anello’s administration and approved by the council, of which Fruscione was a member at the time.

Dyster also said Fruscione has as much access to Brown, the city controller, as he does and shouldn’t be surprised about the city’s financial outlook.

“I believe he had monitored the situation,” Dyster said, adding he has brought the matter up with the council and the subject has come up during public meetings.

Fruscione said the council is now heeding the warnings from Brown and will take steps on Monday in hopes of staving off future financial problems. The council will introduce a resolution calling for an immediate spending freeze and reductions in city spending wherever possible. Fruscione also “guaranteed” that “every single expenditure” request from Dyster’s administration will be voted down by the council majority during Monday’s meeting. He described the idea of spending more money under the circumstances as “more than foolish” and “irresponsible” and declared an end to “free-wheeling expenditures on consultants, reports and questionable projects.”

“We have no choice but to take the power away from him,” Fruscione said. “We have no money at all and we have to take control of spending.”

Dyster said the city is looking to either officials from the state or Seneca Nation to come through with the funds, even if it’s a payment in advance of any agreement the two sides come to.

“The Senecas and the state have put the city in a very difficult situation.”