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Welcome to the Buffalo City Comptroller’s webpage. This site is a valuable resource for a wealth information on the financial affairs of the City. The Comptroller is the City’s top fiscal watchdog, responsible for ensuring that your tax dollars are spent wisely, efficiently, and in ways that make your neighborhood a better place to live. This Department is responsible for all accounting services for the city, in addition to conducting audits to eliminate waste, fraud, and mismanagement in city government. It also is responsible for managing the city's investments and selling the municpal bonds.
Thanks for visiting the “digital” Comptroller’s office. If there is any financial information about the city that you can’t find on this webpage, please feel free to contact me. I am honored to serve the citizens of Buffalo, and privileged for the opportunity to protect their tax dollars as City Comptroller.
Schroeder warns of depletion of reserves,
reliance on one-time revenues in budget report
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Buffalo is in strong financial condition, said Comptroller Mark J.F. Schroeder in a charter-required report on the proposed budget, but closing budget gaps with reserves and one-time revenues could cause major challenges in the future.
“Decreasing revenues and rising pension and health care costs have made the task of balancing the budget especially difficult, said Schroeder. “But relying on fund balance and one-shot revenues could weaken the City’s finances and jeopardize its bond rating, especially if it becomes a trend.”
The mayor’s recommended budget uses $12 million in fund balance to close the budget gap in fiscal year 2013-2014. It will be the fourth consecutive year that reserves will be utilized to balance the budget.
In fiscal year 2010-2011, $12.8 million was used to balance the budget, $16.3 was used in fiscal year 2011-2012, and if the administration’s estimate of a $5 million budgetary surplus in fiscal year 2012-2013 is accurate, $10.6 million in fund balance will be needed in the current fiscal year, which ends June 30.
The total fund balance used for all four fiscal years, assuming all estimates are accurate, would be $51.7 million, which equates to an average of $12.9 million per year.
The ‘Big Three’ Credit rating agencies – Fitch Ratings, Moody’s and S&P – have repeatedly warned the City about relying on reserves to close budget gaps.
“The ongoing use of reserves and one-time revenues for recurring expenditures could pose significant challenges to future budgets,” wrote Standard & Poor’s in its April 1 rating report. Moody’s warned that “continued use of reserves beyond what’s currently expected” could make the city’s bond rating go down.
Buffalo currently has the highest bond ratings in its history, including an A+ from Fitch, an A1 from Moody’s, and an A from Standard & Poor’s. These ratings have allowed the Schroeder to refinance debt for the City and its school district at lower interest rates. Since April 2012, this effort has yielded savings of more than $62 million by reducing interest payments on the city’s debt.
“A potential downgrade by any of the three rating agencies would result in increased interest costs for the City, making it more expensive to borrow funds,” said Schroeder.
The rating agencies, however, are not the only ones monitoring the City’s use of fund balance. In January 2013, New York State Comptroller Thomas DiNapoli implemented the Fiscal Stress Monitoring System, a tool designed to determine the level of fiscal stress for each municipality in the state. Buffalo has not yet received its grade, and a significant factor used by the state comptroller in determining fiscal stress is fund balance.
“The level of a local government’s year end fund balance can affect its ability to deal with revenue shortfalls and expenditure overruns. A negative or low level of fund balance can affect the local government’s ability to provide services at current levels,” said DiNapoli’s report on the fiscal stress monitoring system.
Schroeder said the use of other one-time revenues for recurring expenditures is also a major concern. The budget includes the use of $12 million in state aid currently held by the Buffalo Fiscal Stability Authority. Including this appropriation, the city will have used $41.5 million of the $41.7 million in these funds since 2008, eliminating it as a resource in future years.
Another one-time revenue is the use of $4.2 million in proceeds from the Foreign Fire Insurance Tax, representing five years’ worth of payments that were being set aside pending ongoing litigation. This is not a recurring revenue source, as it will only generate approximately $300,000 annually in the future.
“The budget also includes a $9.6 million transfer from the parking enterprise fund, including the $4.4 million in fund balance, as well as a $5.2 million in revenue from an operating surplus,” said Schroeder. “This will be the third consecutive year surplus revenue from the parking fund has been ‘swept’ into to the general fund to subsidize other operations.”
One of the operations the general fund continues to subsidize is the solid waste enterprise fund. As of June 30, 2012, the solid waste enterprise fund had an accumulated deficit of $22.8 million. This deficit increased $2.5 million over the previous year, in spite of a $3.4 million transfer from the operating fund. Without this transfer, the loss from operations was $5.9 million, which represents 28% of the revenues brought in.
The contract for solid waste removal, which expires in two years, includes a fuel surcharge that has increased exorbitantly over recent years. At the inception of this contract in 2005, the applicable price per gallon of diesel fuel was $2.11, which translated to a fuel surcharge of $1.09 per ton of solid waste. The current price per gallon of diesel fuel is $3.97, which translates to a fuel surcharge of $13.19.
“This means that while gas prices have increased 88 percent over the past eight years, the fuel surcharge has gone up more than 1300 percent during that same time period,” said Schroeder. “This dramatic increase means that in 2005, the surcharge the City paid for transporting 138,000 tons of solid waste was $150,420, but now the City is paying more than $1.8 million for the same tonnage.”
Schroeder’s report also said that many of the one-time revenues that the City has relied upon in the 2013-2014 budget will not be available to the same extent in the future.
“In order to bring more security and stability to the City’s finances, it is imperative other recurring sources of revenue are identified and pursued,” Schroeder said.
Schroeder uses innovative approach to reduce
interest costs on capital borrowing
Short term notes, reduced borrowing will yield savings for city
“I found that the city borrowed more money for capital projects than it was prepared to spend,” said Schroeder. “This resulted in unnecessary interest costs and millions of dollars in unspent funds that increase our debt burden without providing any benefit to our citizens.”
So Schroeder reduced the city’s maximum borrowing amount by 15 percent – from $22 million to $19 million – and made it clear if a project is not ready to begin, then the debt for that project should not be sold until it is.
“In past years, a limit was set, and the city borrowed to that limit,” said Schroeder. “Not only did I reduce the limit, but I made the starting point zero dollars, and would only increase that amount if I was comfortable that each project was ready to begin.”
So when it came time to go to the market to borrow for the city’s $21.3 million capital plan, Schroeder had determined that he would borrow only $17.8 million this year.
“The other $3.5 million in projects are not going away,” said Schroeder. “We just aren’t going to borrow for them and incur interest until we are certain that they are ready to go. It could be next year, or the year after. It will be when we are confident that the money is ready to be spent.”
Schroeder, however, wasn’t done changing the city’s approach to capital borrowing.
“We decided that doing short term borrowing – known as Bond Anticipation Notes – could save the city even more money on interest costs,” said Schroeder.
Bond Anticipation Notes, known as BANs, are issued in advance of a normal bond sale and are paid back within a year of being issued.
“The BANs make the $17.8 million in capital funds available immediately, at a lower interest rate than a conventional bond sale,” said Schroeder.
The rate Schroeder ended up getting on the BAN sale, 0.337 percent, was even lower than he was expecting.
“We had eight investors bidding, and the lowest bidder, TD Securities, offered an interest rate at roughly a third of a percent,” said Schroeder, pointing out that Moody’s rated the BAN sale at MIG1, the highest possible rating for short-term borrowing. “Needless to say, the taxpayers of Buffalo got the best deal possible.”
Schroeder saves $11 million in latest debt refinancing
In less than a year, Schroeder has saved $62 million by refinancing old debt
Buffalo Comptroller Mark J.F. Schroeder’s refinancing of school reconstruction debt will save more than $11 million in interest costs, the latest of six refinancing deals since last April, totaling more than $62 million in savings.
“Over the past year, we have been able to take advantage of market conditions and the city’s improved bond rating to save taxpayers a great deal of money,” said Schroeder. “The less money we spend on interest costs, the more we can spend on providing services to our citizens and making capital improvements to our city.”
The refinancing of 2009 debt from the Buffalo Schools Reconstruction Project reduced interest rates by more than two percentage points, from 5.61 percent to 3.32 percent. Schroeder was expecting to save $9.8 million on the refinancing, but by the time the deal was finalized, the total savings jumped to more than $11.1 million.
Last week, Schroeder sold a bond that saves taxpayers $807,394 by refinancing debt from 2004, dropping interest rates from 5.46 percent to 2.96 percent. A refinancing of the school reconstruction debt last April resulted in savings of $27.9 million, while three other refinancing deals in 2012 yielded more than $22.2 million in savings.
Comptroller Schroeder sells bond saving taxpayers $807,394
Bond refinances old debt, reducing interest rates from 5.46 percent to 2.96 percent
A $7.5 million bond was sold by Buffalo Comptroller Mark J.F. Schroeder that will save taxpayers $807,394 by refinancing debt from 2004, dropping interest rates from 5.46 percent to 2.96 percent.
“We saved even more money than we initially expected,” said Schroeder. “Thanks to market conditions and the city’s bond ratings in the ‘A’ category, taxpayers got the best deal possible.”
The debt was originally incurred in 1994 to build what is now known as First Niagara Center, home of the Buffalo Sabres. It was initially refinanced in 2004 before this most recent refinancing deal, known as a refunding bond.
Last week the city maintained its bond ratings with the “Big 3” credit rating agencies, receiving an A+ from Fitch Ratings, an A1 from Moody’s Investor Services, and an A from Standard & Poor’s. Schroeder said that the city’s improved ratings and low interest rates have allowed multiple refinancing deals that resulted in more than $51 million in savings since he took office in January 2012.
“We are going to continue to refinance old debt and save on interest costs every chance we get,” said Schroeder.
Later this month, another refunding bond is expected to yield nearly $10 million in savings by refinancing debt from the Buffalo Schools Redevelopment Project. That bond sale, which will be done in conjunction with the Erie County Industrial Development Agency, received an “AA3” rating from Moody’s and an “AA-” from Standard & Poor’s.
Comptroller Schroeder says continued fiscal discipline is needed to maintain A+ from Fitch, A1 from Moody’s and A from Standard & Poor’s
The City of Buffalo has maintained its bond ratings with the “Big 3” credit rating agencies, receiving an A+ from Fitch Ratings, an A1 from Moody’s Investor Services, and an A from Standard & Poor’s.
“These ratings will help us get the best deal for taxpayers when we go to the bond market later this month,” said Buffalo Comptroller Mark J.F. Schroeder. “Higher ratings mean lower interest rates on our debt, but it is also a reflection of the city’s improved financial condition, as well as the strides Buffalo’s economy has made."
The ratings were in relation to an $8 million bond Schroeder plans to sell in April that will refinance debt from 2004, resulting in a savings of more than a half million dollars in interest costs for taxpayers. Moody’s also rated the $17.8 million in Bond Anticipation Notes that will fund the city’s capital projects, giving the city a MIG1 rating, the highest possible rating for that type of borrowing.
“The rating agencies have taken notice of the momentum at the Buffalo Niagara Medical Campus and the waterfront, as well as the city’s strong cash position,” said Schroeder. “However, they have also warned against continuing to tap into reserves to balance the budget, or incurring too much debt. So it is clear that continued fiscal discipline is needed in order to maintain these ratings in the future.”
Mayor Byron W. Brown also agreed on the need for prudent financial management in order to keep Buffalo’s bond ratings in the “A” category.
“For seven years my administration has demonstrated strong fiscal discipline, conservative budgeting, and sound management practices that have led to lower taxes and record economic development activity,” said Brown. “I’m very pleased that the major credit rating agencies have recognized Buffalo’s progress and continued our positive credit ratings.”
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Schroeder unveils Watchdog Hotline
Citizens encouraged to report waste, fraud, and mismanagement in city government
Buffalo Comptroller Mark J.F. Schroeder unveiled the Watchdog Hotline, a phone number and website dedicated to exposing waste, fraud, and mismanagement in city government.
“Citizens and city employees who see their tax dollars being wasted or stolen can use the Watchdog Hotline to alert our office,” said Schroeder, who heads the department responsible for rooting out wrongdoing in City Hall. “They don’t have to give their name, but they should provide as many details as possible to help our auditors begin an investigation.”
Citizens can call 851-8779 or use the watchdog website to anonymously report wrongdoing.
“Whether it is quarters from a parking meter, or a sophisticated embezzlement scheme, it’s taxpayer money and we need to know about it,” said the comptroller.
“Once we get the information, our auditors will step in to restore the public trust.”
Buffalo’s year-end financials show fiscal health, but tough challenges lie ahead, says Schroeder
Yearly use of fund balance to fill budget gap is unsustainable, according to comptroller
While Buffalo continues reduce its debt burden and has a healthy fund balance, decreasing revenue and the yearly use of reserves to plug budget gaps could cause problems down the road, said Buffalo Comptroller Mark J.F. Schroeder upon releasing the city’s Comprehensive Annual Financial Report for the fiscal year spanning July 1, 2011 to June 30, 2012.
General fund revenues totaled $438.4 million, down from $439.1 million the previous year, while expenditures climbed $2.9 million to $428.9 million. Transfers out exceeded transfers in by $25.9 million, creating a $16.3 million budget gap that was filled by the use of existing fund balance. Schroeder said the city’s general fund balance remains strong at $113 million, despite the use of reserves to balance the budget.
“Buffalo’s fiscal health is evident in our bond ratings, which is in the ‘A’ category with all three major credit rating agencies,” said Schroeder, referring to Moody’s Investor Services, Fitch Ratings, and Standard & Poors. “However, those same rating agencies warned against continuing to use reserves to balance the budget, which we have done for three consecutive years.”
In an April rating report, Moody’s warned that “continued use of reserves beyond what is expected” could make the city’s rating go down. The 2012-2013 budget that was released a month later called for the use of $11.5 million of fund balance to fill the budget deficit.
“Not only could our rating go down as a result of this practice, but it also unsustainable for the long term, since only the unassigned fund balance - currently at $12.2 million - can be used to balance the budget,” said Schroeder. He said that the remaining fund balance is set aside for other uses, including the $35.7 million in the “rainy day fund” that can be used only for emergencies.
Schroeder said that the root cause of the budget deficit is that revenues - which have dropped three years in a row - aren’t keeping pace with expenditures. A $1.5 million decrease in gross utility tax offset an increase in sales tax revenues of the same amount. Meanwhile, pension costs increased $5.9 million, and health care costs were up $5.6 million. These and other increases exceeded decreases in other expenditures – including $1.4 million in personal services, $1.5 million in utility costs, $2.1 in equipment and capital expenditures, and $2.8 million for claims. Total expenditures increased $2.9 million over the prior year, $1.3 million more than was budgeted.
The overall budget shortfall was a result $19 million in expenditures for unsettled union contracts that were not anticipated in the city budget. While that amount is consistent with prior years’ expenditures, this was the first year that saving from other lines in the budget did not make up the difference. The comptroller said the budgetary impact of any future union contracts would need to be considered before any deal is reached.
Schroeder said he is also concerned with the city’s overreliance on general purpose state aid, which accounted for 36.8 percent of general fund revenues.
However, there were many positive trends in the yearly report, Schroeder said, including the $1.4 million increase in sales tax revenue, which was $3.5 million more than the budgeted amount.
“Not only are Canadian shoppers and travelers boosting our economy, they are also helping the city’s bottom line,” said Schroeder.
Other major budget categories had positive variances, including $7.9 million for personnel services, $3.1 million for pension, $1.1 million for utilities, and $2.5 million for service contracts.
Schroeder also said the city is making great progress in reducing its debt burden.
“Our policy of paying off more debt than we incur every year is really paying off,” said Schroeder. “Capital indebtedness has been reduced from $415.6 million eight years ago to $328.6 million today.”
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Photos by Angel Art LTP, compliments of the Greater Buffalo Convention and Visitors Bureau. Additional photos by Adrian Roselli, compliments of Algonquin Studios