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Buffalo pensions and retiree obligations threaten future city spending

S&P Global and Moody's Investment Services warn growing city pension obligations will require more general fund money leaving less for basic services.

BUFFALO, N.Y. — The City of Buffalo will spend $85.5 million dollars this year on retiree pensions and benefits.  Only the police department, at $90 million, gets a larger portion of the city's $566 million dollar annual budget.  Mayor Byron Brown is unveiling his proposed 2023 - 2024 budget Monday afternoon, proposing to increase spending to $582 million. 

Councilman Rasheed Wyatt chairs the city's Finance Committee and says the funding pressures require city leaders to be better stewards of Buffalo's budget. "We hear about the economic pressures that we have, and we hear about inflation. We just have to make better decisions," he told 2 On Your Side's Michael Wooten.

That may prove difficult as the city hammers out a new spending plan. Standard & Poors Global and Moody's Investment Services recently warned that Buffalo's overall expenses rose 5.7% over last year and that its growing retiree obligations threaten to drain revenue from basic services.

"High fixed costs, such as pensions and other post-employment benefits (OPEB), which comprise 17% of the City of Buffalo's current expenses, remain a concern because no long-term plan or anticipated new revenue to meet these obligations has been adopted," city Comptroller Barbara Miller-Williams noted in a recent press release.

Mayor Brown, proposing to raise property taxes and fees, recently told the Buffalo News, "When we look at the effects of COVID, the economy, and inflation, we see expenses rising much faster than revenues.  And so, to keep the city financially strong, we have to increase revenues in a reasonable way."

Brown said the proposed property tax increases would add $5.8 million to the city's accounts and help provide essential services. 

Buffalo City Comptroller Barbara Miller-Williams told 2 On Your Side, "Ideally, it would be wonderful if the majority of our funds could be spent on things like filling potholes and snow removal. But in reality, that's not possible."  Miller-Williams acknowledged the large amount of money Buffalo spends on retirees and added, "I would not necessarily say worry, but I would certainly say be very concerned."

Moody's Investors Service recent credit opinion of Buffalo's finances cited strengths that included an "Improving local economy and expected continued tax base growth" along with a "solid reserve and liquidity position."  Among the "credit challenges," Moody's warned about "sizeable budget gaps" and future collective bargaining contracts that will soon come up for renewal.

"I think, as the comptroller said, that is a concern," Buffalo City Accountant William Ferguson told 2 On Your Side.  He pointed out that it is up to the city council and administration to determine the budget and amount spent on pensions and retiree benefits. According to Ferguson, the Comptroller's office's responsibility is to report on what's going on financially.  

"They are aware of the concerns that have been brought up in the past by the rating agencies...they have been working the city as a whole has been working on that, addressing that issue through contract negotiations," Ferguson said.

"We are constantly ringing the bell," about growing retiree obligations Miller-Williams said. "Those expenses continue to grow year after year, those expenses, they haven't gone down, they're going to continue to go up," she said and warned, "that revenue streams are not keeping pace with those increases."

   

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