City still challenged by demographic hurdles
The City of Buffalo's finances have stabilized in recent years because of careful budget planning, the oversight of a fiscal control board and increased state aid, according to a report issued today by Comptroller Thomas P. DiNapoli. The report is part of a series of fiscal profiles on municipalities across the state.
"Buffalo's finances are trending in the right direction," DiNapoli said. "Sensible budgeting, improved revenue growth and increased economic development are responsible for the city emerging from years under a financial control board. The leadership of Mayor Brown, city officials and members of the oversight board has been instrumental in creating a positive fiscal outlook for Buffalo, but there are a number of red flags they should be wary of moving forward. I urge city officials to continue their cautious fiscal approach and be vigilant when it comes to long-term financial planning."
"Since becoming mayor, my focus has been on improving the fiscal outlook of Buffalo, fostering an even more vibrant business environment that will accelerate business investment and job creation and running a more efficient government," said Buffalo Mayor Byron Brown, noting that $2.2 billion in new economic development activity is currently underway in Buffalo. "I thank Comptroller DiNapoli for taking the time to review our city's fiscal condition. Buffalo is on the right track and I'm pleased that this profile by the comptroller recognizes that."
"Buffalo certainly faces some significant challenges, both demographically and financially. However, in recent years the city has made considerable progress in improving its economy, as well as its finances," said Buffalo Comptroller Mark Schroeder. "The rapid growth of the Buffalo Niagara Medical Campus, the recently announced high-tech manufacturing hub at Riverbend, and the development of waterfront attractions such as Canalside and HARBORCENTER are reshaping and revitalizing Buffalo's economy at a pace not seen in decades. The city's general fund balance is $166 million, the highest in Buffalo's history, its debt burden has been reduced by more than $120 million in the past decade, and aggressive debt refinancing have led to savings of more than $66 million in interest costs."
Over the past decade, Buffalo's revenues have grown 20 percent to $447 million in 2012. This includes $82 million from property taxes, $85 million from sales taxes, and $173 million from state aid. The revenue growth allowed the city to build up its rainy day reserves, which the city has relied upon in recent years. The city's available fund balance peaked at $113.5 million in 2008 and stood at $30.5 million in 2012.
In July 2012, after the city had three consecutive fiscal years of balanced budgets and gaining access to the debt market, the city's financial control board - the Buffalo Fiscal Stability Authority - entered into an advisory period. Previously, the BFSA was empowered to approve contracts, including collective bargaining agreements; approve the terms of any borrowing; approve the city's multiyear financial plan and impose wage freezes. The authority was created in 2003 at the recommendation of the state comptroller's office.
The report also noted Buffalo is one of four cities in New York with a dependent school district - which means the city must raise and collect property taxes and issue debt on the district's behalf. Due to this system, Buffalo has exhausted 71 percent of its Constitutional Tax Limit as of 2012. This is similar to the other cities with dependent school districts - Rochester, Syracuse and Yonkers.
DiNapoli, however, noted several negative demographic factors confronting the city.
For example, median home value is $66,200, which is noticeably less than the state's median house value of $301,000 and $99,700 in cities. The median household income of $30,230 is lower than the median of $38,699 for cities statewide. And the city's population declined precipitously from 1950 until 2010, from 580,132 residents to 261,310, a drop of 55 percent. Buffalo remains the second-largest city in New York, however.
Also, the child poverty rate is 44 percent, higher than the 28 percent rate for the median city.
The comptroller's fiscal profile of the city also highlighted:
•From 2002-13, Buffalo's full property value increased at a much slower rate (1.9 percent annually) than other cities in New York (4 percent);
•State aid per capita in 2012 was $664, compared with $573 for other "Big Four" cities, and $347 for all cities in New York;
•Buffalo received less than 1 percent of its revenue from federal aid in 2012;
•The city's expenditures grew at an average annual rate of 2.3 percent over the past decade, compared to an average of 3.3 percent for all cities; and
•Buffalo has debt service costs of 10.9 percent of total revenue, compared to 8.4 percent for the median city in New York.
DiNapoli has issued more than a dozen profiles on municipalities across the state. As part of this effort, DiNapoli will also release in-depth reports on some of the issues that contribute to the financial pressures on local governments.
Earlier this year, DiNapoli implemented an early warning system that gives local communities a fiscal stress score. Under his Fiscal Stress Monitoring System, DiNapoli identified 40 counties, cities and towns with fiscal years that coincide with the calendar year that are in fiscal stress. DiNapoli will issue additional fiscal stress updates for other local governments, including Buffalo and cities with different fiscal years, on an ongoing basis.
DiNapoli's system evaluates local governments on nine financial indicators and creates an overall fiscal stress score. Indicators include fund balance, cash-on-hand and patterns of operating deficits. The scores are used to classify a local community as being in "significant fiscal stress," "moderate fiscal stress," "susceptible to fiscal stress" and "no designation." The system also evaluates communities relative to 14 environmental stress factors such as population trends, poverty rates and property values.
For a copy of the Buffalo fiscal profile visit: www.osc.state.ny.us/localgov/pubs/fiscalprofiles/buffalo.pdf.
For more detailed information about DiNapoli's fiscal stress monitoring system and to view reports related to local government fiscal stress, visit: http://www.osc.state.ny.us/localgov/fiscalmonitoring/index.htm.
For access to state and local government spending and more than 50,000 state contracts, visit http://www.openbooknewyork.com/. The easy-to-use website was created by DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.