After nine years under a state-appointed control board, Buffalo, N.Y., will enter fiscal 2013 with new financial freedom.
The Buffalo Fiscal Stability Authority board voted on Tuesday to approve a transition from a control period, under which it has the power to approve or disapprove financial matters for the city, into an advisory period, under which it will only review and comment on the city’s finances.
“There were certain metrics that needed to be met for the board to consider the transition and to vote to transition to advisory, and [Buffalo has] done that. They’ve been, for the last three fiscal years, without a deficit, as well as having access to the credit market,” said Bryce Link, principal analyst at the authority.
The BFSA was created by the New York Legislature in 2003 and the control period has been in effect since then, giving the agency power over the city’s financial plan, budget, debt issuances and wage or hiring freezes.
Buffalo was required to maintain three sequential balanced budgets and access to the financial market during that time before it could transition to advisory status. The transition will take effect on July 1.
“We receive and comment, but we don’t say 'yea’ or 'nay.’ We don’t have the power to approve or decline,” Link said.
Patrick Curry, special assistant to Buffalo Comptroller Mark Schroeder, said that moving on without the control board is a great deal for the city.
“But it’s essential that Buffalo puts its own financial controls in place in order to protect the progress we’ve made over these past few years,” Curry added. “That is why we drafted the Buffalo Fiscal Integrity Act.”
The act, proposed by Schroeder earlier this month, would require annual four-year financial plans, as well as policies to protect the city’s fund balance.
The act was introduced into Buffalo’s Common Council on Tuesday and referred to the legislation committee.
“We are going to continue to work with the council on strengthening this legislation and making sure that Buffalo has the strategies and controls in place to ensure our financial stability for years to come, with or without the control board,” Curry said.
Moody’s Investors Service views the BFSA’s transition to an advisory role as a challenge because Buffalo will no longer have financial oversight.
“The positive thing here is that BFSA is not going away and if the city were to get into any kind of financial troubles, BFSA would have the ability to move back in with a hard control board,” according to Moody’s analyst Robert Weber.
Under New York State law, the authority will exist until 2037.
If Buffalo fails to submit or maintain a balanced spending plan, fails to pay its debt or incurs an operating deficit, the BFSA can transition back into a control period.