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NOV 25 - DEC 03, 2014

Seven Deadly Shortcomings in Dyster’s Budget

By Tom Lizardo
Former City Administrator,
Niagara Falls

November 25, 2014

Would you let Mayor Paul Dyster balance your checkbook?

As a former Niagara Falls city administrator responsible for review of city budgets, I took it upon myself to make a careful review of Mayor Paul Dyster's proposed budget.

I found seven serious "shortcomings" which I would like to share with you, the reader, voter and taxpayers of Niagara Falls.

Shortcoming #1: Less Taxes Collected Than 2006- Not!

According to the mayor's budget presentation: "We are running the city government while collecting less in total taxes than we did in 2006."

Dyster is plain wrong. He is referring to property taxes as if they are the total taxes. But these are sales tax and hotel taxes as well.

Here are the total taxes for:

2006 budget: $44,688,218

2014 budget: $47,965,624

2015 Mayor proposed -- all tax items: $51,153,467

The Mayor's claim that "we are running city government while collecting less in total taxes" is inaccurate. Tax revenues went up between 2006 and 2014 by $3.3 million. And in 2015 they are slated to raise another $3.2 million. Total taxes are up by $6.5 million, even though property taxes have remained stagnant.

Meantime spending (general fund) has gone through the roof:

2006 adopted budget-- $67,207,152

2014 adopted budget --$82,884,936

2015 Mayor proposed--$87,295,570, which leads us to:

Shortcoming #2: Double Your Pleasure, Double the Spending

For the past several years spending has increased, on average, less than $2 million per year. In this election year budget, the mayor proposed increased spending of $4.4 million.

Shortcoming #3: 0 for 3 on Goals

New taxes in 2015 are outstripped by new spending. The total 2015 budgeted tax revenues increase by $3.2 million but spending increases by $4.4 million. This indicates structural issues are likely to grow.

In his budget presentation the Mayor outlined three goals: 1) Service provision 2) Protect the workforce. 3) Cut taxes.

This misses the goal of all budgets and financial management which is: Keep the City solvent. Ending up like Detroit is not good.

Shortcoming #4: Raise Revenue or Control Spending - Neither One

Increasing the structural deficit "on budget" by $500,000 spells bad things for the city's long term solvency. When spending goes up, you have to raise revenue, when you hold the line on taxes, you have to control spending. Being all things to all people means being irresponsible which is what we have in this proposed budget.

Shortcoming #5: Hidden Expenses Not Accounted For

This is one of the "dirty little secrets" of this budget: Even though it came a month late -- it is incomplete. In the mayor's budget presentation he says, "We are reasonably current with most of our City bargaining units. All but the Police Club (union)." However zero dollars are included in the budget for the coming Police Club (Union) pay increases although it is almost certain to happen.

This is a coming budget explosion and perhaps the most irresponsible part of the budget proposal. This also means the structural deficit is higher than it appears.

How much higher? Hundreds of thousands? At least.

Millions? Maybe. But somebody has to quantify it – that’s the whole idea of a budget. It's missing in this budget.

Therefore the true amount of the structural deficit is hidden because no provision is made for a 2015 raise in police salaries, which everybody knows is coming.

Shortcoming #6: 'Spoken for' by Whom?

The mayor's said in his budget presentation: "Many of those (dollars in the fund balances, AKA city savings, AKA rainy day fund) are already spoken for."

"Spoken for" but not budgeted? How can this be? This borders on illegal. If the Mayor has pledged money someplace that it has not been appropriated, or if he expects money is going to be headed out the door, then he must budget for it and get spending legally authorized by the council. Fund balances are supposed to be spent to address unexpected costs, such as -- in a year where the entire budget has been virtually spent -- and a sudden year-ending snowstorm hits. Fund balances cannot be unbudgeted, but "spoken for."

By saying he knows where costs are (spoken for), but not telling us -- he is violating all budget protocol.

This is one of the problems with the way the administration does business with almost zero planning and even less transparency.

Not knowing what these "spoken for" items are, we have to guess whether or not they include any recurring expenses.

They are obviously "foreseeable" since the Mayor mentions them but does not share details with the people or budgets for them.

If these secret “spoken for’s” have anything to do with ongoing expenses, such as salaries, then they add further to the structural deficit. Why not budget them? It's a mystery.

The structural deficit is at least $4.9 million (fund balance transfer) plus the coming Police Club raise (which will total several hundred thousand dollars or more) plus any "spoken for" items that may be of a recurring nature.

There is literally no way for anybody to know what the financial status of the city is because the Mayor has indicated he knows of "spoken for" fund balances, but is not identifying or quantifying publicly.

Seventh and Final Shortcoming: What Growth and Expansion?

The Mayor says he is confident that economic growth and business expansion will grow the tax base and stabilize taxes. Yet the Non-homestead (or commercial) tax valuation has shrunk two years in a row. The Mayor's presentation excuses the fact that next year's non-homestead valuation is shrinking. Dyster was reportedly "very surprised to learn this" and his explanation makes it sound like a one-year anomaly. Yet in the 2014 budget, the non-homestead valuation was down $492,259. In 2015 it's down again, almost 10 times as much, by $4,266,599.

So the 2013 non-homestead tax revenue was $4.7 million higher than what is budgeted for 2015. If this is the "pathway" toward a "soft landing" out of the years of structural deficits that have gone un-addressed by the Mayor and the Council, it seems like a rocky path.

At the very least, the so-called future "growth" forecast that Dyster has made should be quantified, made public and explained what the rationale is for the projected growth (when it is shrinking now) and what this growth of tax-base impact will be.

To believe the mayor, there are new businesses that in time will pay more taxes, yet the Mayor's proposal would grow the structural deficit by 11 percent, despite this new business activity.

This means the 2015 proposal takes the structural deficit to 16.7 percent of the proposed 2015 tax levy. Does anybody really believe that the economic growth in Niagara Falls' property tax base is going to be 16 percent in the near future? Because that's what it is going to take if the Mayor believes what he says: that property-tax-base expansion is going to prove to be the solution to the structural deficit that has resulted from, and is now (once again) set to grow.

Let’s face it, we got “surprised” in 2014 by costs that the Dyster Administration and the Council approved. How could they have been surprising? These costs should have been quantified before they were approved.

Now we are told to believe everything is going to be okay.

But, the basis of many claims in the Mayor’s budget presentation is spurious. The process is shrouded in secrecy. Nobody ever seems to know what’s next. Strong, capable, and competent leadership would explain to us where we are headed.

Sure budgets are boring.

But people should realize that the way the budgets are managed impacts jobs, and taxes, and quality-of-life and jobs.

When the city extracts too much money from local businesses they may head elsewhere. If you work at McDonald’s, or a hardware store, or a coffee shop, your job may be lost because somebody at city hall makes a bad budget decision. If businesses are over-taxed – and Dyster proposed raising businesses property taxes by 7.7 percent -- it might mean the end of their survival, and the end of your job.

The same is true for homeowners. If city's high taxes provides a disincentive to a homeowner to fix her or his house, or makes it financially impossible for that to get done – or worse, chases the person out of town, we all lose.





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