Buffalo comptroller battles to avoid selling authorized debt

Bloomberg News

A county judge ruled it was "a dereliction of duty."

The mayor of Buffalo said she was driven by "ego." And a councilmember accused her of "political chicanery."

But Buffalo City Comptroller Barbara Miller Williams believes she does not have to issue bonds the city council has authorized. 

"There's nothing in the city charter that says I must," Miller Williams said. 

Miller Williams is appealing the Erie Supreme Court's ruling, she said, to preserve "independent fiscal oversight for future generations."

The court battle is prolonging costly delays to Buffalo's capital program, the mayor argues. And the city's finances, already in trouble before the bond spat, are continuing to deteriorate. 

The dispute

In December, the Buffalo Common Council passed the largest capital budget in the city's history — $110 million — over strenuous objections from Miller Williams. 

The entire $110 million will require bond anticipation notes, and Miller Williams set a bond cap for the city of $28 million. 

Mitch Nowakowski, chair of the Buffalo Common Council's Finance Committee, said that the borrowing would not actually add to the city's debt burden, because the majority of the spending is reimbursable. 

The capital plan includes $55.5 million of borrowing on behalf of the Buffalo City School District, of which New York state will reimburse up to 97%, and $26.8 million of borrowing reimbursable by state or federal grants. 

The non-reimbursable projects in the plan are $27.2 million. The city deliberately kept this portion within the comptroller's $28 million debt cap, Nowakowski said, but she still refused to issue the bonds, insisting that it would be "fiscally irresponsible."  

Since Miller Williams was first elected in 2019, this is the first time reimbursable debt in excess of the cap has become a question. Since 2012, the school district has financed its capital projects with $130 million of refunding savings from the refinancing of the Joint Schools Construction Bonds, according to a report from the comptroller.  

In September, Nowakowski, who accused the comptroller of "political chicanery," and acting Buffalo Mayor Chris Scanlon sued Miller Williams for failing to perform her duty. Erie County Supreme Court Justice Emilio Colaiacovo ruled against Miller Williams. 

"Regardless of her intentions, by inserting herself into this process, the comptroller exceeded her mandate and failed to abide by her ministerial rote as provided in the charter," the judge wrote. "Her failure to act pursuant to the Council's resolution was a dereliction of her duty."

In the wake of the ruling, Miller Williams released a statement that said she remained "deeply concerned about how that decision will affect the city's long-term fiscal stability" and about "the continued lack of urgency from both the Administrative and Legislative branches to address the city's growing financial challenges."

She filed an appeal Wednesday.

The comptroller is an elected city office. Miller Williams was elected in 2019 and reelected in 2023 without opposition.

Negative outlooks

In September, S&P Global Ratings and Fitch Ratings both lowered their rating outlook for Buffalo to negative. The city is rated A-plus by S&P and Fitch, and A1 with a stable outlook by Moody's Ratings. 

Fitch's report attributed the outlook drop to the city's weakening reserves and reliance on one-time measures to balance its budget.

"After a reliance on fiscal stimulus moneys and appropriation of unassigned reserves for operations, unexpected expenditure challenges, including legal settlements and a lack of new revenue growth, have strained operations," Fitch's analysts wrote.

Nowakowski said he wasn't surprised by the outlook cuts, and he felt Buffalo's financial habits should have affected its rating sooner. The city spent years balancing its budget with funds from the American Rescue Plan Act. 

Last fiscal year, Buffalo planned to balance its budget with its $15 million unassigned fund balance. In December, lawmakers reportedly were surprised to learn that the fund had already been drained by former Mayor Byron Brown to plug gaps in the prior fiscal year's budget. 

They reportedly patched the gap by spending more of its reserves and ARPA funds and instituting a "soft hiring freeze." The city ended the fiscal year with revenue exceeding projections, but the dip in reserves was a driving factor in its negative outlook, according to Fitch. 

Buffalo is also self-insured and has had to pay out several large lawsuit settlements in the past few years, noted Howard Cure, director of municipal bond research for Evercore Wealth Management.

But despite the city's problems, it isn't exactly debt-burdened, Cure said. 

The city is only at 77% of its legal debt limit determined by the state comptroller. Fitch describes Buffalo's long-term liability burden as "midrange," which reflects "low direct debt and net pension liabilities compared to residents' personal income, offset by very high carrying costs."

Matters of contention

At a September meeting of the Buffalo Fiscal Stability Authority, the representative for the comptroller argued that the mayor's office and the district had not submitted the necessary paperwork to draft a bond resolution. 

"I felt that that was kind of a cop-out," Nowakowski said, "because the comptroller's duty should be facilitating the will of the council and getting any other documentation they need to … successfully go to bond counsel."

The authority was created to oversee Buffalo's finances during a financial crisis in 2003, and transitioned to an advisory role in 2012, according to the city's most recent bond offering document.

The comptroller's representative also argued that the city already had more than $20 million of bond proceeds that were sitting in its coffers unspent. 

Attendees at the meeting pressed the comptroller's representative to explain how the bond cap was determined. 

In the comptroller's report from August, she and Gregg Szymanski, Buffalo's investment and debt management officer, wrote that the debt cap is determined by four ratios: net direct debt as a percentage of general fund revenues, total debt service as a percentage of general and debt service fund expenditures, net direct debt as a percentage of full valuation and percentage of bond principal amortizing over the next ten years. 

According to the report, the city is already well within the comptroller's limits on the first three ratios. Yet the comptroller's projected debt cap barely budges over the next three years, finally increasing to $34 million in 2029 and $36 million in 2030. 

City of Buffalo

As for reimbursable debt, the report states that "consideration maybe (sic) given to increase the debt cap" for projects with dedicated revenue or reimbursements. The comptroller's delegate to the meeting said the city's assurances that the project costs would be reimbursed were not sufficient.

On Sept. 18, Miller Williams oversaw the sale of $29.4 million of bond anticipation notes with a 2.457% interest rate. Wells Fargo had the winning bid. 

According to the comptroller's press release about the sale, $22 million of the process will support Buffalo Public Schools. Miller Williams said those projects "are eligible for up to 97.3% reimbursement from New York State."

Miller Williams will not have to issue bonds for the rest of the capital plan while her appeal works its way through the courts. 

Buffalo is now planning its next capital budget. 

Scanlon said he is doubtful that the region has the construction capacity to complete two capital plans simultaneously; even if it can, he said, the projects in the 2025 budget could cost "tens of millions of dollars" more than they would have if they were completed this year. 

The cost of borrowing may increase, too, Nowakowski added. 

If the city delays too long, it may lose some of the funds altogether. Nowakowski said that in order to qualify for the federal reimbursements, Buffalo must issue the BANs and spend the funds by the end of 2026. 

The rest of Buffalo's finances are just as uncertain as ever.

Buffalo balanced its 2026 budget by planning to sell its parking ramps to the newly-formed Buffalo Parking Authority. This does nothing, Fitch analysts noted, to balance the budget in 2027 and beyond. Plus, Fitch said, the sale "may take time to materialize."

Sean Ryan, likely winner of Buffalo's Nov. 4 mayoral election, proposed using deficit bonds to balance the city's budget earlier this year.

Ryan beat Scanlon in the Democratic primary in June. Scanlon has been acting mayor since October 2024, after Brown resigned.  

"I'm not a pessimist," Nowakowski said. "I believe that it's going to take a lot of things to be able to right this ship, but I believe that we'll end up doing it."

The Buffalo economy offers plenty of reasons to hope, Cure said. It has successfully transitioned away from manufacturing toward healthcare, technology, and higher education.

"It also helps that the governor's from that area," Cure said. "They've gotten a lot of support from the state." Kathy Hochul was the elected Erie County clerk and represented Western New York in Congress before becoming lieutenant governor in 2025.

For Buffalo's next capital plan, Nowakowski isn't sure he wants to abide by Miller Williams's debt cap anymore.

"That cap was just a social norm," Nowakowski said. 

"I'm now talking to other councilmembers, like, 'Guys, how functional is $28 million to get all nine of our districts' capital needs in there?'" Nowakowski said. "$28 million every year to do streets, sidewalks, infrastructure, parks, community centers, public right of ways? That's peanuts."