City banks on a turnaround
But financial outlook bleak at current pace
By BRIAN LIBERATORE

Article appeared April 15, 2007, on page 1A

For weeks I spent any time I could spare in a storage room near the City Comptroller’s Office with 11 years worth of city budgets and a laptop.

I plugged the numbers into a spreadsheet and adjusted them, when appropriate, for inflation. The work revealed some alarming trends and laid out in black and white what Binghamton is up against.

BINGHAMTON -- Binghamton is barreling toward financial ruin.

A repeat of the past decade with plummeting property values and mounting tax hikes could have dire economic consequences, experts say.

"There's no doubt that without a real economic turnaround, you will get to a point where the city won't be able to support the basic services they need to provide to their residents," said Jennifer Vey, a senior research associate at the Brookings Institution, a Washington-based think tank. "And you get this sort of downward spiral."

While some local officials are confident the city has reached a turning point, evidenced by signs of an economic resurgence, the city's budget numbers over the past decade show that without a sharp increase in private investment or a significant infusion of outside dollars, the city will soon not have the taxing ability to pay for its budget.

An analysis of the city's budget numbers over the past decade shows the combined value of all the taxable property in the city has dropped 27 percent since 1997,when adjusted for inflation. The city has lost about 1,800 people in the same time period and watched the tax rate climb 49 percent. Businesses, which have seen an even sharper decline, watched their tax rates climb 70 percent over the past decade.

Binghamton for 2007 is at 79.5 percent of its constitutional tax limit -- a typical number for upstate cities. If property values continue to decline and the cost of government continues to climb at the same rate of the past decade, the city will reach its constitutional tax limit in about five years.

The tax limit, set in the state Constitution, is determined by the value of taxable property in a city.

"As a city advances towards its tax limit, it loses flexibility in its revenue structure and may not be able to sustain the current level of services provided to its citizens," according to a report published online through the office of state Comptroller Thomas P. DiNapoli.

The problem is not unique to Binghamton. A report from former state comptroller Alan G. Hevesi released last year and titled "Analysis of Fiscal Stress in New York State's Cities" finds "many cities (in upstate) appear to be on the verge of more widespread fiscal difficulties."

The report ranks Binghamton among other upstate cities -- including Buffalo, Syracuse and Rochester -- as the worst in the state in its ability to bring in more money. The cities, Hevesi found, rely heavily on state and federal funds and sales tax revenues -- and are approaching their constitutional tax limits.

'A MORE LIVABLE CITY'

The most attractive option -- and likely the only lasting solution to mounting fiscal woes -- lies in the city's ability to bring in investment, according to Binghamton Mayor Matthew T. Ryan.

"It's tough," Ryan said. "People want a return on their dollar."

The city has to reach a critical turning point, he said, where investments snowball into other investments and the city's value starts climbing. Ryan said the city is headed in that direction.

"In terms of assessment, I think we've reached the bottom," he said. "The real estate is going up around here."

The role of city government in attracting investment, Ryan said, lies in making Binghamton a more attractive city both economically, through lower taxes and other incentives to businesses, and physically, by cleaning the city, removing blight and repairing infrastructure.

"It's a comprehensive approach to making the city livable," he said.

Residents and property owners in the city are demanding those changes at neighborhood assemblies, public meetings and business forums.

"I took a ride today on Oak (Street), Murray (Street), Seminary Avenue," said Ellie Farfaglia of Chenango Bridge earlier this month. "The condition, the filth ... of the city is just disgusting. It's like this all the time."

Farfaglia owns four properties on the West Side. She and her husband purchased the properties after they moved to the area from Connecticut 26 years ago.

"We invested in the City of Binghamton," Farfaglia said. "We thought it was a good investment to make. We're stuck."

While creating a more attractive city may attract more business, there's only so much city hall can do. Policies in Albany for decades have driven up taxes and fees, helping transform cities like Binghamton from industrial hubs into hostile business environments.

Rising taxes, energy costs, health care and expensive workers' compensation regulations have conspired to create a "perfect storm of unaffordability," Gov. Eliot Spitzer said last week on a visit to Binghamton.

As testament to the stagnant business growth, the Binghamton area ranked number 173 out of 200 U.S. metropolitan areas on Forbes' Best Places for Business and Careers survey. The area studied includes 248,000 residents in the Greater Binghamton area, including much of Tioga County. The area scored 138 in business costs, 193 in job growth and 131 in educational attainment, the survey said.

"It's been very difficult to get a job after graduating," said Melissa Mattern, a 2005 graduate of Binghamton University. Mattern now works for a small stipend as an AmeriCorps Vista volunteer with the city. "I think it's become hard for young people to stay here, just because there are no jobs."

Local taxes have made doing business and retaining existing jobs more difficult, said Barry Blakeslee, manager of Blakeslee Restaurant Supply on Clinton Street in the First Ward. His bill for city taxes alone is $1,527 per year, a $630 increase over his 1997 bill.

"They're pushing people away rather than inviting them to come here," Blakeslee said. "They're not business-friendly to us. They want to take care of the really big guy and they forget about the little guy. The taxes are really just killing everybody. We're all getting squeezed."

THE COST OF GOVERNMENT

"When you do enter periods where there's struggle, the demands on a lot of these services go up," said Grant Reeher, associate political science professor at Syracuse University's Maxwell School of Citizenship and Public Affairs, "so you have to spend more with less to do it with."

When the city hall building was built in 1972, it was full. The city also had about 18,000 more residents. Now, the Hawley Street building is half-empty, offering evidence of past administrations' efforts to balance the city budget by slashing positions.

What remains, Ryan said, are the threadbare essentials. Cutting more personnel now, he said, will only hurt the city.

"If you start dropping down services, that's not a way to turn the city around," Ryan said.

The largest drain on city tax dollars is by far its police and fire departments, which consume 59 percent of the budget, factoring in all employee costs.

Pension costs, fueled by the city's public safety positions, exploded from $230,000 in 2001 to about $4 million in 2006, according to the city's deputy comptroller, Beverly Palmer. Total employee benefits across all city departments have gone up $6.2 million since 1997, an increase of 93 percent. Health insurance alone has gone up 372 percent. The city in 2007 budgeted $12.8 million,or 26 percent of its general government expenditures, for employee benefits.

But cutting police or fire positions is akin to political suicide in the city.

The city council launched a months-long battle with Ryan, who proposed cutting one administrative position from the city's police bureau in the 2007 budget. Police Chief Steven Tronovitch said the loss would not affect police presence in the city, but some council members insisted the one position could mean the difference between safety and chaos. Ryan vetoed the council's efforts and the position was cut -- but not without bad blood.

Councilman Tony Massar, D-1st Ward, said after the position fell through, "It is a shame that Mayor Ryan has turned his back on public safety."

In 1991, then-mayor Juanita M. Crabb proposed cutting 24 positions from the fire department to save $504,000. The move provoked a protest from about 600 people around city hall and cries from residents that the cuts would mean the difference between life and death. Under the last-in, first-out hierarchy in the fire bureau, the cuts would have thinned the ranks of younger members -- and thus the ranks of emergency medical technicians. Crabb relented and kept the positions, which were among 119 proposed cuts to city staff.

Ryan has no plans to repeat Crabb's attempt at reduction, but instead offered that future consolidation of the county's police and fire could present a piece of the solution to mounting public safety bills.

"Part of the reason why that (consolidation) has become so popular lately as a mantra is this tantalizing idea that somehow you're going to save money by reducing the administrative redundancy," Reeher said. While consolidating services, he said, can save tax dollars, the strategy only works if there is a reduction in overall positions.

THE CITY'S FUTURE

It took Binghamton decades to get where it is, Ryan said. The transformation won't be overnight.

But there are signs of hope.

"You're seeing some movement back into cities that you haven't seen in a long time," Vey said.

In Broome County, 23 percent of the population lives in the city. That's down from 27 percent 30 years ago, but the number has remained steady for the past decade.

"The economy is starting to value some of these assets of dense urban centers," Vey said. "There's really no better time for these cities, to build on their assets and revive their economies."

The Brookings Institution, Vey added, has launched a large-scale study of hundreds of old industrial cities, including Binghamton, due to be released in late May.

Signs of growth across the state in high-tech fields, research and development, and innovative technologies also are generating hope for cities like Binghamton.

"Somewhere out there on the campuses of our public and private colleges across the state, the seeds are being planted for what could become the next Genentech, or, closer to home, IBM," said Dan Gundersen, Empire State Development chairman, in a speech delivered last month.

Discussions of Binghamton's economic future inevitably include Binghamton University. The university's Small Scale Systems Integration and Packaging Center last year was named a Center of Excellence. The state since 2001 has poured millions into Centers of Excellence in Albany, Buffalo, Syracuse, Canandaigua and on Long Island as part of an economic revitalization scheme.

But until those investments translate into jobs, and efforts to make the city more livable and a more attractive investment option come to fruition, the city will need help.

"My point of view is that we should be able to rely on a decent amount of state aid that reflects the cost of doing business," Ryan said. The city, he said, will need state aid to balance its books during the transition period.

Without a $1.6 million increase in state aid to Binghamton in 2007, taxpayers would have faced a double-digit tax increase.

Reliance on state aid, however, can carry baggage, Reeher said.

"As the state takes on more of a role, it's going to have more of a voice, more authority over how things work," Reeher said. "That's the old story of federalism at the national level."

Among the most nagging hindrances to the city's success, Ryan said, is pervasive pessimism fostered through years of economic decline, an exodus of jobs and a shrinking population. While the city holds potential for revitalization, he said, the negative mentality can be poisonous.

"If there's a majority of people that say it (Binghamton) won't come back," Ryan said, "it won't."