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Dyster Must Shoulder Most of Blame for Crisis

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By: Tony Farina

The fiscal crisis confronting the City of Niagara Falls has been in the making for years and Mayor Paul Dyster, who is now in his third term as the city’s chief elected official, must shoulder considerable blame for the mess along with other elected officials who went along for the ride.

Dyster survived one gaming crisis that ended in 2013 with the infusion of $89 million in slot payments to the city that accompanied the settlement of the four-year stalemate between the state and the Seneca Nation that had put Niagara Falls on the brink of financial ruin.

Unfortunately, the city went through the money in short order, using $9 million a year in casino cash and nearly $3 million a year of reserve funds to balance city budgets from 2014 through 2017 instead of approving realistic spending plans in which recurring expenditures are funded by recurring revenues, as urged by the state comptroller.

Now, with a second gaming stalemate at hand between the state and the Seneca Nation, the city is facing a more than $13 million deficit for next year with no casino money in sight as the Senecas and the state prepare for arbitration in December.

State Comptroller Thomas DiNapoli has warned the city for years to rebuild unrestricted fund balance and to develop and regularly update a comprehensive multiyear financial plan that includes realistic measures for rebuilding fund balance levels.

The city, instead, spent down the reserves, used casino cash to balance the budget, and fell short on the comprehensive financial plan.  Now, Dyster and city lawmakers are feeling the heat and will be relying on a $12.3 million loan from the state and the likely approval of a $168-a-year garbage user fee to make it through next year, all the while praying the state and Senecas reach a settlement at the December arbitration.

As Council Chairman Andrew Touma puts it, “we are facing tough decisions in the coming days,” as the council must act on the mayor’s budget by Dec. 1.  Those tough decisions include the unpopular garbage user fee and the possible rejection of a $2.5 million tax cut in Dyster’s proposed budget.  The public will get a chance to weigh in on the user fee at a hearing on Nov. 14, but it appears lawmakers will probably have to approve it and in their favor, it is consistent with the state comptroller’s position that the city needs to find recurring revenues and not rely on one-shots.

The Seneca Nation is abiding by the gaming compact that doesn’t provide for any more payments to the state after 2016.  The state will contend at the arbitration that the mere extension of the compact means revenue sharing continues.  It will all be up for argument at the December arbitration with Gov. Andrew Cuomo, assuming he wins re-election to a third term, and the new Seneca Nation administration.

So all this begs the question what about next year?  If there’s no resumption of casino revenue, will Niagara Falls go bankrupt?  How will the city recover without the casino revenue?

In its recent downgrade of Niagara Falls bonds, Fitch Ratings cited “erosion of the city’s gap-closing capacity given the Seneca Indian Nation’s decision in mid-2017 to cut off casino gaming moneys it paid to the state.”

The Wall Street credit rating agency cited the weakening of reserves with limited prospects for a near-term resumption of the revenue transfers.

It all spells big trouble in the coming year and for years to come, and the city’s failure to act on the comptroller’s budget recommendations while it was still receiving casino cash has made the latest stoppage all the worse.

As Touma and his fellow lawmakers know, there is no quick fix to the crisis and the decisions will be tough. Simply put, the city is at the mercy of the gaming arbitration and there is no guarantee of success.

Will Dyster’s hand-picked successor Seth Piccirillo prevail next year in his bid for mayor with the city’s fortunes at an all-time low?  We will find out!

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