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Schroeder Issues Warning on Borrowing

August 1, 2012
Press Release

The City of Buffalo regularly borrows more money than it is prepared to spend, resulting in unnecessary interest costs, warns Buffalo Comptroller Mark J.F. Schroeder in an annual report required bythe city charter.
More than $56 million in unspent funds, some of which were borrowed more than a decade ago, have increased the Citys debt burden while providing no benefit to taxpayers and citizens, saidSchroeder.
Schroeder recommended that all unspent funds should either be expended for their respective projects, or rescinded to reduce the citys property tax levy. ?He added that Buffalo should only sellbonds for projects for which funds can be spent immediately and quickly.?
If a project is not ready to begin, then the debt for that project should not be sold until it is, said Schroeder.
The purpose of the document, known as the Comptrollers Estimate & Report, is to guide the citys planning of capital projects in the future, in addition to providing an update on the status ofcapital accounts from previous years.?
Capital improvement projects are one of the most important and fundamental functions of municipal government, said Schroeder. ?While there are an unlimited number of worthwhile potentialprojects, financial and time constraints dictate that the City identify projects that are a priority to its citizenry, in addition to being feasible economically, and able to be completed in areasonable amount of time.
Pursuant to the City Charter, the reports contains the maximum amount of capital debt that the city may prudently incur during the next five years, which Schroeder determined to be $95 million, anaverage of roughly $19 million per year.
Since borrowing funds to complete capital projects results in interest costs, it is imperative that the City keep borrowing at a minimum, said Schroeder. ?The maximum amount of capital debtis similar to a credit limit on a credit card while it is possible to spend to the limit, it usually is not financially prudent to do so regularly.
Schroeder reduced the previous debt limit, roughly $22 million per year, by 15% to account for the citys tendency to borrow more than it can spend.
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