City of Niagara Falls warns of looming financial crisis

Fri Mar 8, 2013 1:31pm EST

Related Topics

* Tribal gambling dispute prompts revenue shortfalls

* City faces deeper structural issues

* City's outstanding debt around $73.8 mln

By Edward Krudy

NEW YORK, March 8 (Reuters) - Officials from the City of Niagara Falls, New York, are warning that looming debt payments could force the cash-strapped city into a crisis later this year if it does not receive money it says it is owed by the native American Seneca Nation.

The city faces debt payments of $800,000 in June and a further $5 million to $6 million by the end of the year, according to Glenn Choolokian, chairman of Niagara Falls City Council. That, he says, could push the city over the edge.

"Our financial situation is getting worse and worse," said Choolokian. "We're in trouble."

Part of Niagara's funds are tied up in a dispute about gambling revenues between New York State and the Seneca Nation which operates a casino in the city. Choolokian says the amount is as much as $66 million and would help the city avoid a crunch.

Chookolian said the council had rejected a "disaster budget," proposed by Mayor Paul Dyster, which would have raised taxes and laid off workers.

Dyster and the Seneca Nation were not immediately available for comment.

Niagara's problems go beyond disputed gambling revenues. A report in December by the State Comptroller's office highlighted a drop in revenues, a stagnant tax base and an increasing number of families living in poverty.

Niagara's financial problems, although particularly acute, resonate with many struggling towns in northern New York state where an exodus of industries, and aging populations mean higher unemployment and a great strain on local finances.

The city's population has almost halved to around 50,000 between 1960 and 2010, the largest drop in any city during the period, the report found. Nearly one fifth of families live in poverty and the city's unemployment rate is 11.4 percent, compared to the state-wide average for cities of 8.2 percent, according to the December report.

The comptroller's report also found that Niagara has exhausted 76 percent of its constitutional debt limit and has $73.8 million in outstanding debt.

The ratings agency Standard & Poor's has the city's debt at BBB+, still investment grade, but revised its outlook down to negative in the middle of December, shortly after State Comptroller Thomas DiNapoli issued his report.

Standards & Poor's pointed to the decline of the city's manufacturing base and tourism industry, which has hit property prices and incomes, while exacerbating the city's debt problem.

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