• Structural fiscal problem driven by deindustrialization and population loss
• Proposed FY27 capital budget includes USD 59.1m in bonding
• Experts warn of need for long-term fiscal sustainability

Buffalo’s emergency infrastructure borrowing push highlights the challenge of addressing deferred maintenance while restoring fiscal balance to a budget that analysts say suffers from deeper structural weaknesses.

“I would characterize Buffalo’s present difficulties as a structural fiscal problem that has produced another immediate budget crisis,” Mark Davidson, whose research has examined Buffalo’s fiscal governance and long-term budget challenges, told Debtwire Municipals. Buffalo has faced variations of the problem for nearly 50 years, driven by deindustrialization, population loss and suburbanization.

Emergency repairs add to financial balancing act

On 2 November, Mayor Sean Ryan’s administration proposed a USD 94m capital budget for FY27 (started 1 July), including USD 59.1m in bonding and USD 34.9m in emergency borrowing. The plan includes engineering projects, bridge repairs and USD 9m for repairs or replacement of roofs at city-owned facilities.

The plan follows and increases a proposal the Buffalo Finance Committee advanced on 20 October for the city to borrow up to USD 20.06m from the Buffalo Fiscal Stability Authority (BFSA) for emergency repairs to more than 15 city buildings, including fire stations, Saline Field and community centers.

The proposal drew scrutiny from City Comptroller Barbara Miller-Williams (D), who requested additional information and a fiscal analysis of the proposed declaration of need.

For bondholders, the question extends beyond whether Buffalo can finance the repairs. The city’s infrastructure needs are emerging as it confronts a longer-running mismatch between recurring revenues and expenditures, Davidson, a professor at Clark University and co-author of Shrinkage and Urban Fiscal Governance in Times of Crisis: A Case Study of Buffalo, New York, said.

Successive administrations have stabilized the city’s finances temporarily but have not put Buffalo on a path to long-term sustainability, he said. The city has repeatedly used reserves, outside assistance and one-time revenues to balance its budget.

“The biggest question in Buffalo is how it can create the fiscal capacity needed to sustain basic city operations over the long-term,” Davidson said.

Deferred tax increases raise the stakes

Fred Floss, a professor of economics and finance at SUNY Buffalo State University and secretary of the BFSA, similarly pointed to Buffalo’s reliance on reserves and its failure to make regular adjustments to recurring revenue.

The city kept property taxes low for 15 years, leaving it with some of the lowest rates among comparable cities, Floss told Debtwire Municipals. Avoiding smaller annual increases has made the eventual adjustment more difficult.

“My estimate is, to get back to balance over the next two years, they will have to raise property taxes by about 30% to 35%,” Floss said.

Taxpayers may be asked to pay more largely to preserve existing services and rebuild reserves rather than fund new programs, Floss added.

Capital needs increase pressure

Both academics said additional borrowing should not automatically be viewed as evidence of fiscal deterioration. The purpose of the debt matters.

“Borrowing to repair a fire station is fundamentally different from borrowing to meet ongoing operating expenses,” Davidson said. Capital borrowing can be appropriate when projects provide public benefits over many years.

Floss similarly said governments should weigh borrowing’s costs and benefits rather than focus solely on debt constraints. Deferred maintenance can increase future repair and operating costs, while infrastructure investments can generate savings.

Still, Buffalo’s broader financial obligations complicate the picture. Davidson said his research found the city reported approximately USD 1.1bn in other post-employment benefit liabilities in 2024, primarily for retiree healthcare, exceeding its outstanding bonded debt. The obligations are not immediately payable but will continue to influence future budgets.

BFSA financing offers potential savings

Borrowing through the BFSA could offer Buffalo cheaper financing because the state-created authority has stronger credit characteristics and dedicated revenue protections, Floss said. The authority was created during Buffalo’s 2003 fiscal crisis and initially exercised more direct control over city finances while helping the city borrow.

Under current legislation, however, the BFSA will terminate in 2037, limiting it to bonds with maturities of up to 10 years, Floss said.

Davidson said the proposal does not necessarily mean Buffalo has lost access to capital markets. The city continues to borrow directly and retains investment-grade ratings.

But the difference between the BFSA’s and Buffalo’s borrowing costs deserves scrutiny, he said.

“If the BFSA offers significantly better borrowing terms, we need to understand why,” Davidson said. The answer could lie in bondholder security or the financing structure, but a widening gap could also indicate deteriorating perceptions of Buffalo’s creditworthiness.

A longer-term challenge

Both Floss and Davidson said Buffalo’s recovery will require more than balancing a single annual budget or completing its current capital projects.

Davidson said the city needs a credible multiyear plan aligning recurring revenues and expenditures while reducing reliance on reserves, asset sales and exceptional assistance.

State and federal investment has been critical to preventing financial collapse and supporting redevelopment, he said, but has not necessarily strengthened the city’s recurring fiscal capacity.

“There is a crucial distinction between public investment in a city and an improvement in the city government’s recurring fiscal capacity,” Davidson said.

Buffalo can use debt to address urgent infrastructure needs, and the BFSA may reduce borrowing costs. But neither strategy alone will resolve the city’s underlying challenge: generating sufficient recurring revenue to sustain services and long-term obligations.