Niagara Falls officials are warning that the upstate New York city faces a possible financial crisis by late summer.
City Councilman Robert Anderson Jr. said that if an arbitration panel does not award the city the money it feels it is owed by July, the city would face cash flow issues in August.
The Seneca Nation opened a slot casino in Niagara Falls in 2002. That same year the Indian tribe reached a 14 year gaming agreement with New York State. The agreement specified that the Senecas would share revenue with the state. Following state finance law, New York is supposed to share a portion of the revenue with the city.
The city is supposed to share 25% of what it receives with local schools and hospitals.
Niagara Falls and the state stopped receiving funds from the Senecas in 2009 and the city now claims to be owed $67 million through the end of the current year. The Senecas owe New York $500 million, Anderson said.
New York State is currently in binding arbitration with the Seneca Nation over Seneca gambling casino revenues. Once the Senecas stopped making payments to the state in 2009, the state stopped distributing a portion of the payments to the New York cities of Niagara Falls, Buffalo and Salamanca.
City officials expect the arbitration process to be complete by the middle of the year. If the outcome is delayed or the Senecas win, the city could face major financial problems in the late summer, Anderson said.
“We’re broke,” the councilman said.
The city is working with the New York Power Authority on a deal to get money in case the casino money does not appear, said Mayor Paul Dyster.
Anderson said he seriously doubted whether the Seneca Nation was going to give Niagara Falls any money. “If we get it, it will be a miracle,” he said.
Niagara Falls is 23 miles north of Buffalo and borders Canada.
In early January, Moody’s Investors Service dropped Niagara Falls general obligation debt to Baa1 from A2 and kept the city on review for a downgrade. In December Standard & Poor’s revised its outlook on its BBB-plus rating of the city’s GO debt to negative. Fitch Ratings last rated Niagara Falls in September 2011, when it gave the GO debt an A rating.
The city of roughly 50,000 has $66 million in long-term debt, Moody’s said in January. The city’s financial problems go beyond not receiving the Seneca money, Anderson said.
Niagara Falls finished building a courthouse about two years ago. The courthouse was “very expensive” and the city owes about $30 to 50 million in debt to pay for the construction debt, Anderson said. The city has to make courthouse debt payment of $5.5 to 7 million by the end of the year, Councilman Glen Choolokian said.
Getting the Seneca money would help but would only push off the city’s financial problems for about a year, Anderson said. There are guidelines as to how the city could use the Seneca casino money. However, the city can use the money for projects that the general fund would otherwise pay for.
Over 67% of the residents of Niagara Falls are on public assistance or Social Security, Anderson said.