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While Dyster Raises Spending, Council Rejects Dyster's Plea for Help From State Restructuring Board

By Frank Parlato

The Spirit of Detroit was created by Marshall Fredericks. The broken spirit
of Detroit was created by elected officials not cutting the budget when they had the chance... Now federal judges will decide who gets cut and by how much. People in Niagara Falls say “it can’t happen here.”But it can.

Last month, the City Council of Niagara Falls, including Mayor Paul Dyster's normally compliant members, Kristen Grandinetti and Charles Walker, voted against his request to have the city join the New York State Financial Restructuring Board for Local Governments (FRB).

The program, initiated by Gov. Andrew Cuomo earlier this year, features a 10-member review board that makes budget cutting recommendations for cities, towns, villages and counties that enter the program.

There is no obligation to accept the recommendations unless the municipality accepts what could be up to $5 million in grants or loans from the FRB.

"You’ve got the panel with experts and expert staff behind them looking at a lot of cities and I think that comparative analysis would be helpful,” Dyster said.

The FRB was crafted for cities like Niagara Falls, Syracuse, Rochester and Buffalo, upstate cities that have rising retirement costs, falling populations and declining property values.

Their goal is to avoid a state control board where, when a municipality can't pay its bills, the state takes over and an appointed board, not subject to the electoral process, imposes cost cuts, refinances debt and freezes wages.

The FRB can suggest combining functions within a municipality, reducing employees and limiting overtime, and “shared services” between municipalities or even merging municipalities.

In order to stave off state control boards or federal bankruptcy, steep cuts will be needed in Niagara Falls and elsewhere. It is estimated that out of New York State's 1,607 municipalities, 389 -- eight counties, 44 cities, 149 towns and 188 villages -- are eligible for FRB guidance, based on high taxes compared to property values, low reserves and the strong possibility of a control board or bankruptcy unless changes are made.

Stockton, Calif., entered federal bankruptcy after a 40 percent cut to its city payroll and then exited it by raising sales tax to 9 percent, paying creditors 50 percent and, significantly, 1,100 retirees lost their health insurance.

Bankrupt San Bernardino, Calif., halted employer contributions to the pension fund after filing for bankruptcy protection.

In Detroit, which may serve as the model for a future Niagara Falls, the people who live there cannot afford the government and its $18 billion debt, unfunded pension and health care liabilities.

Detroit's bankruptcy plan offers pensioners 16 cents on the dollar. A retiree counting on a pension of $30,000 will get $4,800, if the plan goes through.

In Niagara Falls, not all of the problems are caused by the city. The state regulates local employee pension costs. Public pension costs across New York are mushrooming.

Like Detroit and other municipalities, New York State’s pension program faces long term challenges, but is currently well funded.

Many believe New York’s public pension plans need to be replaced and become similar to what most private workers rely on for their retirement.

This is not just a matter of financial necessity but basic fairness since the vast majority of those who pay for municipal pensions - the state taxpayers - will never receive anything approaching the benefits available to public employees.

With unions demanding higher wages for members and, because of high taxes in New York State, causing a flight of residents and wealth and leaving behind a growingly impoverished taxpayer base, bankruptcy looms for many, many municipalities.

But there is no appetite to cut.

When Niagara Falls Council Chairman Glenn Choolokian tried to cut $500,000 from the city's $83 million budget, he was out-voted and it was whittled down to under $100,000.

Meantime, while Dyster is seeking the FRB to help him find cuts, his proposed 2014 city budget increases spending by $1.5 million, dips into the city’s reserves by $4.4 million, uses $5.2 million of slot machine revenue and raises a raft of salaries at city hall.

And Dyster started a new era of city hall salaries where most department heads now earn close to $100,000 and many get overtime, despite the fact that department heads are not supposed to be qualified for overtime.

Meantime, Dyster says he is banking on subsidized "economic development" plans to reinvigorate the city with new jobs and more people coming to live here and pay taxes.

The truth is, in Niagara Falls, like many other cities headed for bankruptcy and possible repudiation of pensions and health care benefits for retirees, there is no appetite to cut expenses. None.




Niagara Falls Reporter - Publisher Frank Parlato Jr. www.niagarafallsreporter.com

Dec 17, 2013