Public Hearing to Review State Laws and State-Imposed Municipal Finance Oversight Boards in the Context of Fiscally Distressed Municipalities, and Hear Testimony as to New Initiatives That Provide Relief and Assistance to Fiscally Distressed Municipalities

City of Corning, New York 12

Brian Napoli 101 121 13 Town Supervisor

Town of Ridgeway, New York 14

Dino Fudoli 127 131 15 Town Supervisor

Town of Lancaster, New York 16

Phillip Haberstro 138 142 17 Executive Director

Wellness Institute of Greater Buffalo 18 and Western New York 19 20 ---oOo--- 21 22 23 24 25 1 SENATOR MARTINS: [No audio] on Tuesday, to 2 hold our first hearing in Syracuse, which was very 3 interesting. 4 Apparently, we have many challenges ahead of 5 us, and all of that was brought to stark reality 6 with the filing of bankruptcy by Detroit just a 7 month ago. 8 It raised some real issues for us here in 9 New York. 10 Certainly, we're aware of how difficult it is 11 for many of our municipalities, in dealing with this 12 fiscal crisis, to make ends meet. And we're 13 certainly aware of the difficulties affecting, not 14 only our villages, our towns, but our cities, but, 15 specifically, our cities in Upstate New York have 16 been so drastically impacted. 17 Historically, this just adds to that, so we 18 felt it was appropriate, that we not only hold these 19 hearings to discuss, not only how the State should 20 be responding, and how we should be conducting 21 ourselves, and perhaps look at potential 22 legislation, but, also, New York has historically 23 used control boards as a means of intervention to 24 prevent bankruptcy. 25 And we have many examples of those, but some 1 examples of those across the state, two right here 2 in Buffalo and Erie County, but certainly in my own 3 home county of Nassau, we've seen it. We've seen it 4 in Yonkers and Troy. 5 And, so, we do have examples out there. 6 And what I'd hope that we can get to today, 7 in addition to the broader question, but also get 8 into some discussions about the control board: 9 what's worked, what hasn't worked, and your 10 perspectives on that, if there is a better model. 11 And if we are called upon to intervene, to 12 provide relief for a municipality, going forward, 13 those questions become important. 14 The structure of the control board, how 15 should we approach it, because each one tailored to 16 the individual community, to address the need 17 presented by that community. 18 But there should be some best practices that 19 we can build upon. 20 In addition to that, a second question that I 21 would love to hear from you on is, the idea of 22 whether or not we have to allow a municipality to go 23 over the proverbial cliff before the State responds 24 by providing relief in the form of, or structure in 25 the form of, a control board. 1 Is there an opportunity, or should there be 2 an opportunity, for the State to intervene before 3 that? 4 And, certainly, there has been an argument 5 made, and we heard from Mayor Miner from Syracuse on 6 Tuesday, that there are options that are available 7 to a municipality before they reach that critical 8 crisis stage, that may not necessarily be available 9 later. 10 So if there is an opportunity for the State 11 to intervene sooner rather than later, is there a 12 benefit to that? And, if so, how should we approach 13 it? 14 If you could provide us with your thoughts on 15 that, that would be wonderful. 16 With me today we have Senator Pat Gallivan. 17 Senator, it's great to have you here. 18 Thank you. 19 But, again, we have a great panel, and a 20 great list of witnesses for our hearing today. 21 I'm looking forward to hearing from all of 22 you. 23 Thank you. 24 Senator. 25 SENATOR GALLIVAN: Good morning, everybody. 1 Thanks for being here. 2 And I'd like to welcome Senator Martins to 3 Western New York. 4 The Senator, I'm not sure if he mentioned it 5 at the beginning, chairs the Senate Standing 6 Committee on Local Government. 7 And, we deal with local governments on a 8 regular basis, and hear all the time of the 9 challenges that local governments face. 10 And I'm interested in hearing some of the 11 things, some of the ways, that we can try to help. 12 I know it's kind of -- I say that, even 13 though I'm smiling now, legitimately, because the 14 State has imposed many burdens on local governments, 15 and we know that. 16 We now then have the tax cap, and the 17 pressures that's put on. 18 We have tried to deal with some of the 19 mandates. 20 Long term, I think we've done better, with a 21 freeze in the increase in the local share of 22 Medicaid. That's something that positively affects 23 counties over time. 24 The new pension tier is something that will, 25 ultimately, longer term, help all local governments. 1 But, clearly, we have a ways to go. 2 So I'm interested even in going a little bit 3 beyond the questions that Senator Martins raised, 4 and interested in hearing some of the things that we 5 might be able to be helpful with, in the way of 6 legislation, putting that forward, and some reforms 7 to help a little bit more, in the short term, for 8 somebody that might not be on the cliff, and might 9 not be on the end, but, what can we do to prevent 10 them from even approaching it? 11 But I appreciate everybody being here. 12 Of course, we bumped up against the President 13 today, and that was unintended, but, I am very, very 14 pleased to see that those of you who are here placed 15 importance on this issue and are willing to stand up 16 and testify. 17 So, thank you. 18 SENATOR MARTINS: Thank you very much. 19 First to testify, we have 20 Comptroller Mark Schroeder, from here in the city of 21 Buffalo, and as well as, First Deputy Comptroller 22 Anne Forti-Sciarrino. 23 Thank you very much, both of you, for being 24 here this morning. 25 MARK SCHROEDER: Thank you. 1 Thanks, Senator. 2 First and foremost, let me just formally 3 introduce Anne Forti-Sciarrino. 4 She has spent a lifetime here in City Hall, 5 especially in the 12th floor of the 6 Comptroller's Office. 7 Her work is flawless, and she is respected, 8 not only by all the employees in auditing control, 9 but throughout City Hall and all of its entities. 10 So I am very pleased to have her with us 11 today. 12 I especially want to acknowledge 13 Senator Pat Gallivan, my friend, who served here as 14 sheriff for many, many years, and is doing a 15 tremendous job as our senator in some of the 16 districts that I represented in the Assembly. 17 And, so, my seven years in the Legislature, 18 I could always count on Senator Pat Gallivan to be 19 supportive for Upstate, and for our community. 20 Senator Martin, we welcome you here. 21 One of your famous constituents, the 22 comptroller, New York State Comptroller Tom DiNapoli 23 lives in your neighborhood, and you represent him, 24 and he sends his best. 25 And, Senator Gallivan knows me and some other 1 people in this room. 2 It wouldn't be right if I just didn't offer a 3 brief historical perspective, and so I will, 4 especially to you, Senator Martins, because I know 5 that you are relatively new in the Senate, and I'm 6 not sure to what your exposure is to Buffalo, 7 New York. 8 So, I just wanted to give you a little 9 history, that, the first inhabitants of our city and 10 surrounding areas were Indian tribes, mostly 11 composed of the Iroquois Confederacy, of which the 12 largest tribe was the Seneca Nation. 13 The Seneca Nation was led by Red Jacket. He 14 was given a medal of honor by 15 President George Washington. 16 And, also, the Seneca Nation is still 17 instrumental here in our community. 18 And just today, we received a $15 million, 19 that came in the receipt file, it's in the bank, 20 it's going to the General Fund. 21 So, we're very pleased and happy about that, 22 and we'll talk why that's important to us a little 23 bit later. 24 Then, I'm sure, Senator, that you remember 25 the song -- I won't sing it -- "In 1814, We Took A 1 Little Trip," and it talks about Colonel Jackson, 2 who took bacon and beans, and fought the bloody 3 British in the town of New Orleans. 4 While Colonel Jackson was doing all of that, 5 Buffalo was burning at the hands of the British, but 6 Buffalo always comes back. 7 We always make a comeback. 8 And in 1825, because of the New York State 9 Legislature, and the governor, DeWitt Clinton, we 10 were the western terminus of the Erie Canal, which 11 made us then, in 1832, incorporated by your 12 honorable body, the city of Buffalo. 13 And so we have a tremendous history. 14 Senator, you mentioned the beauty of this 15 building. 16 This building was built art deco-style in 17 1932. And I would encourage you, when you leave 18 today, to take a look at the front of the building, 19 and the carvings that are on the front of City Hall, 20 which would represent our history. And it shows the 21 Seneca Nation, it shows ironworkers and steelworkers 22 building our cities. 23 And the best one, in my view, shows the 24 carving of a woman and a baby, which would depict, 25 or symbolize, fertility, and our future. 1 And I know that's why you're here today, 2 because you're interested in Buffalo's future. 3 So once again, we want to thank you so much 4 for being here, and give us an opportunity to talk 5 to you a little bit. 6 I have a very brief testimony, which is 7 certainly germane to what you're interested in 8 today, so I would like to read a little bit of it, 9 and then I'll have a couple of miscellaneous 10 thoughts at the end, which might be entertaining for 11 you. 12 And then, any questions that you have, 13 Anne Forti-Sciarrino and I would be happy to do it. 14 So as Senator Martins indicated, it is a 15 challenging time for municipalities across 16 New York State, and really beyond, because, Senator, 17 you referenced Detroit, $18 billion bankruptcy. 18 Unheard of. 19 Jefferson County, Alabama; two municipalities 20 in California; bankrupt, or in bankruptcy court. 21 Chicago recently downgraded three notches by 22 Moody's. 23 So, rising pension and health-care costs, 24 coupled with a lack of revenue growth, have made 25 balancing municipal budgets more difficult than 1 ever. 2 Fortunately, Governor Andrew Cuomo and 3 Comptroller Tom DiNapoli have shown a great deal of 4 leadership in helping municipalities meet these 5 challenges. 6 And, certainly, the role that you both have 7 played, Senators, in the role of the New York State 8 Legislature has been helpful to us as well, and we 9 appreciate it. 10 In January, Comptroller DiNapoli had 11 implemented the fiscal-stress monitoring system, a 12 tool designed to clearly identify those local 13 governments that are moving towards or are already 14 in fiscal stress. 15 While Buffalo has not yet received its grade, 16 analysts, at my request, and on my staff, have 17 examined the criteria, and have assured me and 18 Anne Forti-Sciarrino that the City falls into the 19 best possible category: not in fiscal stress. 20 I also knew that in January, but I called the 21 Comptroller and congratulated him on this 22 initiative, and told him, that even though we're 23 not, we support those types of preventive tools that 24 would help cities like Buffalo, and across 25 New York State. 1 Other municipalities, however, are not as 2 fortunate. 3 Once Comptroller DiNapoli's monitoring system 4 identifies the local governments that are in fiscal 5 distress, Governor Andrew Cuomo has set up a system, 6 or systems, that provides these municipalities with 7 solutions that are tailored to the unique need and 8 problems. 9 Governor Cuomo's financial-restructuring 10 board, in our view, will help distressed 11 municipalities develop, on a case-by-case basis, a 12 customized reorganization plan designed to improve 13 their fiscal condition. 14 There is up to $80 million in State funding 15 to assist local governments in implementing this 16 plan, or their plans, but only if they follow the 17 restructuring board's recommendations, which could 18 include multi-year financial planning, functional 19 consolidation, mergers, shared services, fewer 20 elected officials -- no offense -- and other 21 cost-cutting measures. 22 The restructuring board would also provide an 23 alternative to the binding-arbitration process, and 24 could render an expedited arbitration ruling within 25 nine months. 1 These State programs will go a long way to 2 protect the financial security of local governments 3 across New York, but it is not the State alone that 4 is responsible for keeping municipalities solvent. 5 Just recently, the mayor of Syracuse, in my 6 view, offered a misguided tirade, in criticizing the 7 Governor and the Legislature. 8 And, in my view, what she should be 9 criticizing, are those governors and legislatures 10 before you who shoved things down municipalities' 11 throat. 12 An option is an option. You opt in, or you 13 don't opt in. 14 It's real simple, and it's up to the 15 municipality. 16 So I think, in the future, hopefully, that 17 will continue, that municipalities will have an 18 option to do certain things that would be helpful to 19 them. 20 Each city, town, and village in the 21 Empire State must do everything in their power to 22 provide a functioning and fiscally stable government 23 for its citizens. 24 This is exactly what we are doing, Senator, 25 here in Buffalo. 1 In our first year in office, we drafted an 2 amendment to the City charter, that requires -- 3 "requires" -- an annual four-year financial plan. 4 It was embraced by the Mayor; it was embraced 5 by the Common Council. 6 Long-term fiscal planning is one of the 7 cornerstones of sound fiscal management. 8 And this measure, which was approved by the 9 Common Council and the Mayor, ensures that Buffalo 10 will always have an eye on the future when planning 11 its finances. 12 We are also working with the Council on 13 legislation that would protect the City's rainy-day 14 fund, to ensure that funds set aside for emergencies 15 would be used appropriately. 16 As the chief fiscal officer of Buffalo, we 17 have refinanced the City's old debt on six separate 18 occasions, saving taxpayers more than $62 million in 19 interest costs. 20 The interest rates we are paying on both our 21 refinanced debt and our new borrowing are the lowest 22 in the city's history. 23 Our department performed audits that have led 24 to more transparency, accountability, and efficiency 25 in City Hall, and we have worked with the 1 University at Buffalo on improving operations in our 2 department. 3 The Comptroller has the elastic power to call 4 an audit anywhere. 5 The very first audit we called were on 6 ourselves, and we had the UB come in and do an 7 organizational audit on us, so that we made sure, 8 and just to reinforce, that everything within the 9 Comptroller's Office is best practices. 10 We also created the watchdog hotline, a phone 11 number and website, that allows citizens to 12 anonymously report waste, fraud, and mismanagement 13 in city government. 14 Wall Street has taken notice of our improved 15 fiscal management and revitalized economy. 16 Buffalo has received straight A's in the 17 bond ratings from three major credit-rating 18 agencies, including an "A+" from Fitch, an "A" from 19 Standard & Poor's, and, an "A1" from 20 Moody's Investor Service, who upgraded our rating 21 last year. 22 This past May, we invited the rating agencies 23 to come to Buffalo, and we gave them the grand tour 24 of Buffalo, and what is happening with our economy. 25 That's what they were interested in. 1 And, so, we started with 2 Congressman Brian Higgins, who, in my opinion, 3 without him, there would be not much to talk about 4 in terms of the waterfront; and, so, he gave them 5 the grand tour of the water's edge. 6 Then we took them to the Buffalo-Niagara 7 Medical Campus, and Patrick Whelan, the COO there, 8 gave them the grand tour. 9 And then we ended with Howard Zemsky, in 10 Larkinville, not so much because of Larkinville, but 11 because of Mr. Zemsky's responsibility to the 12 regional council, and, also, as a main player for 13 the Governor, and for our government, in terms of 14 the $1 billion allotted by our Governor. 15 There are many obstacles ahead for Buffalo, 16 but we are confident, that with our efforts to 17 protect the city's finances, combined with the 18 leadership provided at the state level, and from 19 your honorable body, there is no challenge that we 20 cannot meet. 21 I just want to deviate, if I may, Senator, 22 for a minute, outside of the testimony that we've 23 offered to you in a packet form. 24 There's a couple of things I anticipated, 25 that I thought maybe we should address, and one of 1 which is, the total city of Buffalo budget is 2 approximately 1.4 billion, of which just under 3 a billion is for the school district. 4 And so I want to congratulate 5 Senator Grisanti, and all of you: 60 votes. 6 Whenever you offer anything, legislatively, 7 that would accept transparency -- 8 And that's one of the bills that you all 9 voted on recently, that would require that the 10 school district be able to put their -- the budget 11 out so that the people would be able to actually 12 know about it and vote on it. 13 These are types of things I think the public 14 deserves, they need to know, and we thank you for 15 that effort. 16 Also, please continue some of the reforms, 17 just like we did. 18 We changed the charter for a four-year plan, 19 and we're hoping that you would do that. 20 Finally, I just wanted to point out, and I'm 21 certain that you're aware of this, but when you talk 22 about, you know, legislation, and certain things, 23 that the Senate and the Assembly could be doing, one 24 of the things I would like to point out is that, in 25 2017, by law, there will be a constitutional 1 convention: the Constitutional Convention of 2017. 2 And the voters, as you know, have been pretty 3 stirred up over the last five years or so, with what 4 they call the "dysfunction of Albany," and also the 5 "dysfunction in Washington." 6 And so I think this is a perfect time to give 7 the voters an opportunity to weigh in on their 8 constitution. 9 And, for instance, there are certain things 10 that I hope that you would be open to. 11 Within a constitutional convention, it would 12 be the perfect time to abolish the Board of Regents, 13 which is an absolute useless body, in my humble 14 opinion. 15 They've been around since 1784. 16 Every single member, every single Board of 17 Regents, has been hand-picked by Speaker Silver. 18 The Senate, as you know, don't even show up 19 in the joint session to elect Regents, because it is 20 lopsided and top-sided. 21 And, in my view, it's us, elected officials 22 and the educators in this state who should be 23 running the state, not a nebulous board of people 24 who have been picked -- hand-picked by the Speaker. 25 There are certain other things that we may 1 want to consider, like, term limits, not on you, but 2 on leadership, so that people like the 3 Assembly Speaker, doesn't have 19 years and 4 accumulated power. 5 He's elected by 17,000 people, the Governor's 6 elected by over 4 million, he was equal power to a 7 Governor. 8 It's not the intent. 9 It was never the intent of the Legislature. 10 The first 150 years of the New York State 11 Assembly, the average length of a speaker was 12 one year, one month. 13 Everybody from across the state had an 14 opportunity to run the legislative session. 15 It has not -- it's turned into something that 16 is not working for anybody. 17 And I can tell you, the constituents in 18 upstate would agree, pretty much, with what I've 19 just said. 20 There are some other thing that I hope that 21 you will look at, either legislatively or through 22 the constitutional convention: 23 I hope that there would be a debt limit on 24 state and local governments; 25 Erase what Governor Mario Cuomo, in 1991, 1 called "back-door financing, phony-baloney 2 authorities"; phony-baloney authorities that have 3 over $120 billion of debt that the taxpayers of our 4 state are responsible for, ultimately; 5 And also, lastly, in 1991, they talked about 6 constitutionalizing use of generally accepted 7 accounting practices, known as "GAAP." 8 It is recommended by the Comptroller. 9 It is not in the New York State Constitution; 10 it should be. 11 So that pretty much are some of the 12 observations that I would like to make today. 13 And if you have any questions for me and 14 Anne Forti-Sciarrino, we'd be happy to answer them 15 for you. 16 SENATOR GALLIVAN: I don't have any 17 questions, but I would just like to congratulate you 18 and commend you on the steps that you have taken to 19 improve the Comptroller's Office with able-bodied 20 help, of course. 21 It is -- as a lifetime resident of 22 Western New York, it, is -- it's good to see offices 23 move in a positive direction. 24 And, no doubt, the steps you and your staff 25 have taken have been helpful to the positive 1 direction of the city. 2 MARK SCHROEDER: Thank you. 3 SENATOR GALLIVAN: So, I congratulate you for 4 that. 5 MARK SCHROEDER: Thank you, Senator. 6 SENATOR GALLIVAN: And thank you, as well. 7 MARK SCHROEDER: Thank you very much. 8 SENATOR MARTINS: Thank you. 9 First of all, thank you for welcoming me to 10 Western New York. It's great to be back. 11 I do have a relative from Cheektowaga, so, I 12 have been here a few times, but, certainly, the 13 first time in this wonderful building. 14 And, you're right, this is a wonderful 15 testament to the heritage that is the city of 16 Buffalo. 17 MARK SCHROEDER: Thank you. 18 SENATOR MARTINS: In the context of the 19 municipal fiscal distress that many of our 20 communities are facing, we're hearing, time and 21 again, that the two biggest stress points for our 22 municipalities are pensions and health-care costs. 23 And, you know, one of the discussions we've 24 had, from time to time, is: How do we handle these 25 pension costs? 1 You know, if there's one thing, as a former 2 mayor, that I looked for in budgeting, was 3 stability; the ability to be able to predict my next 4 year's budget, and provide stability to my 5 constituents. 6 And when we have these spikes of pension-cost 7 increases, ranging, 20 to 30 percent year-to-year, 8 it prevents us from having to do that. 9 And I've often said that, you know, whether 10 it's a school district or whether it's a 11 municipality, just because you happen to be going to 12 school at a time when you're going through fiscal 13 crisis, requiring increased pension costs, doesn't 14 mean that you should be prevented from having the 15 same level of education and the same opportunities 16 as someone who is going to school during good times. 17 And, generally, you pay more precisely at 18 times when you can't afford to. 19 So when we go through tough economic times, 20 and the market suffers as a result, our pension 21 costs increase, and municipalities have to make 22 decisions that they otherwise would not have to. 23 So, you know, I've been an advocate for 24 streamlining, or flattening, pension costs so that 25 we can provide that kind of predictability. 1 And we tried to include some of that in the 2 budget this year. 3 Are there -- go through suggestions that you 4 may have, with respect to how we can approach 5 pension stability, as well as, some thoughts about 6 what we can do with respect to providing some 7 stability when it comes to health-care costs. 8 MARK SCHROEDER: First of all, I'm going to 9 have Anne answer a couple of those questions when we 10 get into the specifics of what we're finding, 11 specifically regarding health costs and pension 12 costs. 13 However, I would like to point out, and kind 14 of reiterate, that we welcome, from our Governor and 15 from our State Legislature, always options that 16 municipalities can examine, and make a decision, to 17 whether or not they want to be involved in pension 18 leveling, or smoothing, or whatever Liz Benjamin 19 from YNN, or wherever she's from, calls it. 20 But I think these are good options for 21 municipalities, because, as you know, municipalities 22 across New York State, all of us, are in 23 different -- we're in different stature with, maybe, 24 the rating agencies. And, maybe some of us have 25 been within the control board, as you've mentioned. 1 We're celebrating now our fourteenth month 2 with a soft control board, which means that the 3 elected officials of Buffalo, the Mayor, the 4 Comptroller, and the Council, are actually 5 governing, and living within our means, which I am 6 certain is music to your ears, Senator Martins, and 7 to my friend Pat. 8 So, for the most part, as you know, once upon 9 a time, Buffalo maintained its pension system. 10 It doesn't anymore. 11 We're a member of the New York State Pension, 12 and the only one in New York State. 13 New York City has a massive pension of 14 $160 billion. 15 And so, within our world, I wanted to give 16 Anne an opportunity. 17 We anticipated that this might be a question, 18 and we just wanted to kind of give you the answer, 19 and what it means to Buffalo, and what some of those 20 increased costs are. 21 SENATOR MARTINS: Thank you. 22 And your point is very well made. 23 Again, the idea of options, there rarely is a 24 "one size fits all" approach to government, 25 especially when we're dealing with a state like 1 New York State, so, the ability to provide those 2 options, and allowing our local municipal leaders to 3 make those decisions, is also important. 4 So, thanks again. 5 MARK SCHROEDER: Thank you. 6 ANNE FORTI-SCIARRINO: Okay, from the -- on 7 the pension costs, the city, since 2010, we've seen 8 a large increase in both our ERS and our PRS. 9 I think we've gone up about $18.7 million 10 over those four years, so we're seeing that as an 11 area where its hitting our budget with the most 12 impact. 13 I guess, as far as our concern would be, with 14 the pension smoothing, was, right now, we have a 15 pretty good rating with the rating agencies. 16 We're really afraid, if we start spreading 17 that out, it could impact the fact that we're not 18 putting away what we need to for the pension system. 19 So, a lot will depend on how it's billed, and 20 how we're told. 21 I think they helped us a couple years ago by 22 just telling us, two years ahead of time, what we're 23 going to owe; so, for our budget planning. 24 But, it's still an area that, even though we 25 see it growing, and we'd look to see it lower, 1 without some changes in how the State says what we 2 owe, I think it would hurt our rating agency -- our 3 ratings if we didn't pay what we were 4 [unintelligible], and we're lucky that we've been 5 able to pay on time in December each year. 6 SENATOR MARTINS: And I certainly appreciate 7 that. 8 And, certainly, the two systems that are 9 available for ERS and for TRS can make it quite 10 complicated when it comes to bifurcating the two 11 pension systems and the two systems of smoothing, 12 are actually different. 13 So, yeah, I can see where that would be 14 troublesome. 15 But, again, if we're going to address the 16 pension costs, certainly, Tier 6, I believe, went a 17 long way towards doing that, for the long term. 18 But, again, that may be further down the line 19 than many of our municipalities actually need. 20 And the immediacy of some of our distressed 21 communities require, I think, that we take a look at 22 something more current. 23 I'm glad that Buffalo is in a position where 24 they don't have to, and so I congratulate you both 25 for that. 1 I want to welcome Senator Grisanti. 2 Senator, great to see you. 3 Thanks for joining us. 4 SENATOR GRISANTI: [No audio.] 5 SENATOR MARTINS: No, we're just wrapping up. 6 Again, the idea of having local options, the 7 idea that a community can go through the 8 control-board process and come out of it on the 9 other side, unscathed, and, frankly, better off than 10 they went in, is a great example for many of our 11 communities that are facing just those decisions, in 12 the short term. 13 So, thank you. 14 And if there are no other questions, thanks 15 very much for joining us. 16 MARK SCHROEDER: Thanks for this opportunity. 17 We appreciate it very, very much. 18 SENATOR GRISANTI: Sorry about that. 19 I just have one question, and whether you're 20 able to ask it or not of the Comptroller, but that's 21 up to you: 22 I put forth legislation this past year, 23 regarding the city of Buffalo and the 24 school-district budget. 25 MARK SCHROEDER: I'm on record, Senator. 1 SENATOR GRISANTI: Oh, you did speak about 2 it? 3 MARK SCHROEDER: Yeah. 4 SENATOR GRISANTI: Okay. 5 MARK SCHROEDER: I congratulated you for the 6 legislation, and for the 60-to-2 vote in the Senate, 7 that gives transparency to the Buffalo voters, so 8 that they have an idea of what that nearly 9 $1 billion budget contains. 10 And so I congratulate you, and all the 11 members of the Senate, who voted for it. 12 And, I can only imagine where it is in the 13 Assembly right now, but I'm hopeful that we're able 14 to get that to be a reality. 15 SENATOR GRISANTI: Well, if you were back 16 there, I'm sure we would get it pushed through, so, 17 we miss you up there. 18 So, thank you, for Buffalo, and for the 19 residents of Buffalo in your district that you 20 represented. 21 MARK SCHROEDER: Thank you. 22 SENATOR GRISANTI: So, thank you very much 23 again for testifying here. We appreciate it. 24 MARK SCHROEDER: Thank you very much for the 25 opportunity. 1 SENATOR MARTINS: Our next witness this 2 morning is the Erie County Fiscal Stability 3 Authority's chairman, Jim Sampson; and, 4 executive director, Ken Vetter. 5 Gentlemen, good morning, and thank you for 6 joining us this morning. 7 JIM SAMPSON: Good morning. 8 SENATOR MARTINS: As part of our, I guess, 9 intro this morning, and, again, in light of the 10 realities on the ground, so to speak, in so many 11 different parts of the state, and especially 12 affecting many of our upstate cities, the idea of 13 New York's approach towards municipal fiscal 14 distress is somewhat unique in the country. 15 Different states handle things differently. 16 Many of the states do absolutely nothing and 17 allow for bankruptcy. 18 New York has taken a more proactive approach, 19 historically, tailoring legislation to each specific 20 municipality in the form of a control board. 21 And, so, to the extent that we can get some 22 perspective on the function of a control board, as 23 yours, and also some perspective on your thoughts as 24 to what has worked and what hasn't worked, I would 25 appreciate that. 1 JIM SAMPSON: He never calls me 2 "Mr. Chairman," except in public. 3 What I'm going to do is, Ken has been with 4 the Fiscal Stability Authority for almost since its 5 inception, and actually prior to that was very 6 involved in county finances. 7 So what I thought we could do is: 8 He can give a brief history of how we got to 9 this point; 10 Then I can talk a little bit about what we're 11 doing today, and how we're doing that. 12 KEN VETTER: Thank you, Mr. Chairman. 13 I'll be -- I was always taught that 14 cleanliness was close to Godliness, and brevity is 15 close to cleanliness. 16 So, I want to make it to heaven, so I'm going 17 to be very brief this morning. 18 Just very briefly, I may be able to bring a 19 little bit different perspective, because, in my 20 history, I worked as the government analyst for the 21 Buffalo-Niagara Partnership, the regional Chamber of 22 Commerce, looking at the county, the city, and the 23 other cities, down to the villages, within the 24 region. 25 Also, after the county's fiscal crisis, I was 1 budget director, to help pick up the pieces, for a 2 period of time, and then joined the Erie County 3 Fiscal Stability Authority. 4 So I guess I'm -- I've not only been on both 5 sides of the fence, if you can find a third side of 6 the fence, I've been there as well. 7 But let me talk a little bit about 8 Erie County, what precipitated a stability authority 9 for the county itself. 10 Back in '04-'05, you know, people around here 11 remember the red/green budget, wherein, there was 12 one budget that proposed an increase in sales tax 13 that would have kept the county at status quo; 14 There was another budget that was seen as the 15 "Draconian budget," that no one wanted. 16 And I think the people who proposed the 17 budget at that time assumed the Draconian budget 18 would never happen. 19 It did, and I think that was a shock to them 20 at that time. 21 You know, the county had been experiencing 22 some fiscal difficulties for a number of years. 23 You know, in the late '90s, into the early 24 2000s, you know, the County had had a healthy fund 25 balance, in excess of $280 million, out of a 1 $1 billion budget; so we're talking about a fund 2 balance of almost 30 percent of the budget, which is 3 amazing. 4 By the time I became budget director at the 5 County, the fund balance was virtually zero. And at 6 the end of the first year, it was $4.9 million. 7 So the County had gone through some 8 significant changes, had spent down. 9 And over a period of time, I think this was 10 probably the most insidious part, didn't hit 11 financial difficulties immediately, but, year by 12 year, kept going through reserves. 13 Where I think, you know, that's where the 14 State's early warning system will come into effect, 15 because I -- and I've looked at this from different 16 points of view, that, you know, financial distress 17 generally doesn't hit all at once. 18 It's an accumulation of issues over a period 19 of time, that all of a sudden coalesces, and a lot 20 of people are surprised by that. 21 I think, given the early warning system 22 that's out there, the chances of that kind of thing 23 happening at a municipality of this position, and 24 going forward, are probably much more remote. 25 Based upon the county's financial position, 1 the stability authority was created in July of 2005. 2 It started out as soft control board, you 3 know, really giving advice to the County, and was 4 really given, as part of the carrot and the stick, 5 could become a hard control board under certain 6 circumstances, and was given two items that could be 7 of very use to the County. 8 One was, there was an appropriations set up 9 at the State. It was a dry appropriation at the 10 time, to be shared by the City and County, wherein, 11 $50 million would be available for efficiency, and 12 that a portion of that would go to Erie County. 13 That portion for the County was ultimately 14 funded in the amount $17.5 million, and that 15 efficiency-grant money has paid back, time and time 16 again, in creating, for instance, new contracts for 17 the County, that help it with health-insurance costs 18 and employee costs, that help it with building 19 costs. 20 So I think, you know, if you are looking at a 21 distressed municipality, looking at State 22 involvement, the carrot and the stick, for us, the 23 stick was, if things get worse, there's a control 24 period, where, we have approve contracts, we approve 25 all hiring, there can be, you know, freezes on 1 specific accounts or overall spending. 2 People really didn't want that, but things 3 actually got worse before they get better. 4 When that happened -- actually, this was the 5 first stability authority in the state, in which, it 6 started out in a non-control period, went to a 7 control period, and now we've gone back. 8 So, I think if we're looking at where the 9 County is at this point, what we've done, the 10 efficiency-grant money has really helped the county. 11 The four-year planning cycle has really helped the 12 county. 13 Because most municipalities, from my 14 perspective, from being with the regional chamber of 15 commerce, most municipalities look at next year's 16 budget, and this year's budget, and really may not 17 look beyond that. 18 They think that they'll look at it when they 19 have to. 20 I think another thing that's been of 21 tremendous assistance has been, you know, because 22 we're a State agency, because we intercept sales tax 23 for the County, our bond rating is significantly 24 higher than the County, so that we can go to the 25 long- and short-term market. 1 In the short-term markets, we have a "MIG1" 2 rating, and the Fitch, you know, "1+" rating, the 3 highest, you know, short-term bond-borrowing rating 4 you can get. 5 And we have a, you know, "double-A+" 6 long-term rating, which is close to the highest 7 rating you can get. 8 Over the last four or five years, in terms of 9 borrowing costs for the County and the medical 10 center, because we -- you know, we did issue the 11 bonds that funded the new nursing home at the 12 Erie County Medical Center, we've saved Erie County 13 over $150 million in borrowing costs, which is 14 amazing. 15 So, again, I guess, from an historical 16 perspective, I think what happened with Erie County, 17 given the early warning system, may not happen in 18 the future. 19 In terms of pension costs, again, you know, 20 I like that there is an option that's out there. 21 I don't know if Erie County would take 22 advantage of that option or not. 23 In terms of health-care costs, I guess there 24 are two things that the County has done that are 25 very good, and I would, you know, recommend for 1 other municipalities: 2 One is, going to a single health provider, 3 and bidding that out with multiple providers. 4 You're at the whim of the market. 5 If you're large enough, which most cities and 6 towns are, and counties are, that you can reduce 7 your costs by having a single provider, and 8 negotiating with that provider, you know, based on 9 an initial bid; 10 And really, secondly, and what the County has 11 done in a contract that's been endorsed by the 12 authority, and partially funded by the authority, 13 is, really, reworking union agreements, to have 14 employees pay a portion of their health care in the 15 current time, and pay some portion, if not all of 16 their health-care costs, upon retirement, for new 17 employees coming into the system, so that current 18 employees aren't negatively affected. 19 Mr. Chairman, that's my -- those are my 20 specifics. 21 I'll turn it back to Chairman Sampson at this 22 point. 23 JIM SAMPSON: And thank you, Ken. 24 I'm going to go off script for a second, and 25 echo Comptroller Schroeder's reminiscion [sic] about 1 the Buffalo public-school budget from this 2 community. 3 It comprises two-thirds of the budget for the 4 city of Buffalo. 5 And nobody in this chamber who sits around 6 these tables has the opportunity to vote on that. 7 They can talk about it, but they can't vote on it. 8 The City does contribute $70 million to that, 9 which is, I think, half of its tax base. 10 And I would wholeheartedly support an effort 11 to give the public an opportunity to pass judgment 12 on the school-board budget. 13 The only people that really spend much time 14 with it are about five floors below here, and it's a 15 very arcane, secretive, dense process. 16 So, anything that can open the light of day 17 on that process, and how money is spent, is more 18 than welcomed by some people, not everybody. 19 So that's off script a little bit. 20 I was appointed chair of County -- the 21 Erie County Fiscal Stability Authority in March of 22 last year by Governor Cuomo. 23 And, one of the things that had happened is, 24 in fact, I was involved with the Buffalo-Niagara 25 Partnership, and the red and green budget, and an 1 analysis of how that could be avoided in the future. 2 We learned a lot about what drives expenses 3 in the county, and revenue. 4 But one of the things that we were concerned 5 about, was that the relationship between the control 6 board and previous chairmen, and then also the 7 previous county executive, was a very, very 8 contentious, embattled kind of relationship. 9 We appreciate the fact that the -- there's 10 probably not many chief executives in any county or 11 municipality that embraces having someone look over 12 their operation, but the reality is, that the 13 control board was in place. 14 So what we wanted to do is, develop a working 15 partnership between the control board and the 16 Erie County executive and his staff, and we think 17 we've gotten to that point. 18 It's very, very clear what our authority is. 19 It's very, very clear that we look at the 20 financial operations and the vulnerabilities of the 21 County on a monthly basis. 22 I agree with Mr. Vetter, that a 23 four-year plan is something that, not only does the 24 County compare and submit to us for approval, but we 25 analyze that, and have to say whether or not it 1 represents the reality that we have in front of us. 2 So I think it builds in a sense of 3 accountability, a sense of information, and a sense 4 of transparency, and you can have a respectful, 5 thoughtful discussion about, not only what is 6 happening this year, but what's going to happen in 7 future years. 8 One of the things that I think we've been -- 9 and Ken did a nice job of addressing the efficiency 10 grants. 11 One of the things, and I guess to your point 12 of union contracts, we've been able to use 13 efficiency contracts to help the County settle 14 longstanding negotiations, frequently dealing with 15 things like, health care, and one-time payments -- 16 or, balloon payments, or one-time payments, as an 17 inducement for union members to agree to the 18 contract. 19 As a result, some legacy costs are being 20 controlled or reduced. 21 So I think that's a real important function, 22 when you look at coming in and trying to assist 23 municipalities, it's not only, sort of, you know, 24 putting that accountability level on them, but then 25 also saying, "And here are some resources to get 1 better at what you do." 2 I think the part that -- for us, that's been 3 the most gratifying, is that, now we do all of the 4 borrowing on behalf of the County. 5 Earlier this year, I think it was earlier 6 this year, we helped refinance a significant amount 7 of debt, which is going to save -- 8 How much over the -- 9 KEN VETTER: Yeah, just that debt alone was 10 over $2 million. 11 JIM SAMPSON: -- that was going to be saved. 12 Monday, we're going to close on a short-term 13 borrowing of revenue, in anticipation of -- 14 What, about $110 million? 15 KEN VETTER: Yes. 16 JIM SAMPSON: And then about another 17 $40 million bond issuance for the County's share, 18 the renovation of Ralph Wilson Stadium. 19 Both of those will save the County a 20 significant amount of money in interest payments. 21 So we've developed a respectful and decent 22 partnership with the County Executive, and lowered 23 the temperature of that a little bit. 24 He and his staff deserve a great deal of 25 credit for that. 1 And, we've also created the environment in 2 which it's not, we're going to control you, and, 3 who's going to be in charge, but how do we serve the 4 county more effectively? 5 So, it actually, I think, is, at this point, 6 working very, very well, and the county benefits 7 from it, and it creates a level of discipline that I 8 think the community can take comfort in. 9 And I'd also compliment Ken and his staff who 10 do a very, very good job of creating and presenting 11 a very objective kind of analysis around the fiscal 12 operation of the County. 13 So, thank you. 14 SENATOR MARTINS: Thank you. 15 Senator Gallivan, any questions? 16 SENATOR GALLIVAN: I do have a question, and 17 I'm not sure if you're able to answer it. 18 I was trying to find -- I don't have it with 19 me, but I was just trying find the projected 20 savings, both for the change, from the Tier 4, to 5, 21 and then, Tier 5, to 6; 22 And, also, the projected savings over -- 23 we're in our first year of a three-year phase-in -- 24 Ah, we've got it. 25 -- Medicaid. 1 You talk about the four-year plan. 2 So the County submitted a rolling four-year 3 plan to you, right, every year? 4 KEN VETTER: Yeah, every -- every -- a new 5 one is due in October, when the budget comes up. 6 SENATOR GALLIVAN: And then you're in a 7 position that you have to approve that 8 four-year plan each time it comes before you? 9 As I look at the projected savings now, and 10 this is as a result of the freeze in the increase of 11 the local share of Medicaid, which was at 3 percent 12 per year, going back -- I think, always going back 13 to 2005, what that number was then. 14 But, nonetheless, as we look at the next 15 several years, by the time we get to the last year, 16 the savings is projected to be, for Erie County, 17 over $10 million. 18 My question is: What's the County doing with 19 the savings? 20 Are they -- 21 KEN VETTER: I think the County has 22 incorporated that savings into their plan already. 23 I think what's really happened -- I mean, the 24 plan is fluid. 25 There are other expenses that have risen 1 faster than the County had anticipated in previous 2 plans. 3 I mean, you know, pension costs have gone up 4 a little bit faster than in the past. They've been 5 revised. 6 There have been impacts based upon property 7 values in Erie County. 8 I mean, plans that we got a few years ago 9 assume, 2, 3, sometimes 4 percent increase in 10 property values in the county that would impact the 11 tax cap. 12 The last time we looked at this, it was just 13 over 1 percent. 14 And for next year, it's probably going to be, 15 1, 1 1/2percent. 16 SENATOR GALLIVAN: Yes. 17 KEN VETTER: And there are different things 18 there. 19 Also, you know, Erie County Medical Center 20 has been a significant financial issue for 21 Erie County. 22 You know, the intergovernmental transfer 23 payments have been significantly higher than the 24 County originally anticipated. 25 In the plan, they had $16.2 million. 1 For instance, last year, they paid over 2 $40 million. 3 And, you know, in theory, with the 4 Affordable Care Act, those payments would go down. 5 They haven't gone down [unintelligible]. 6 SENATOR GALLIVAN: If we assume that the 7 workforce stays stable, the same number of 8 employees, same number of positions, do you know, 9 what is the attrition rate of people leaving and new 10 employees being hired? 11 KEN VETTER: Well, really, in the County's 12 financial plan, it assumes that, each year, there 13 are going to be a deletion of 25 full-time 14 positions. And that in any given year, the County 15 has about a 5 percent attrition rate. 16 They have about 4,000 employees, so, you 17 know, that's about 200 people a year leave county 18 government. 19 And whether that means -- the question is, 20 whether they're replaced, or not. 21 SENATOR GALLIVAN: Thank you. 22 SENATOR MARTINS: Senator Grisanti. 23 SENATOR GRISANTI: Yes, my question -- the 24 question that I have was probably talked about, but 25 it's [inaudible for several minutes]. 1 [Inaudible] regarding the taxpayer's money 2 that is put on the debit card. I'm not talking 3 about the [inaudible] debit card, that will limit 4 that money to [inaudible] alcohol, tobacco, lottery 5 tickets, you know, gaming, [inaudible], things that 6 allow that to happen. 7 Is that something that the control board 8 would agree with, in trying to implement that type 9 of program, to make sure that tax dollars, not only 10 here, but across the state, are going to 11 [inaudible]? 12 KEN VETTER: Well, if we're talking -- I can 13 talk specifically to Medicaid, and what the County 14 has done. 15 Because I think what you're asking is more of 16 a policy question, that -- I mean, we're -- we look 17 at the finances of the County. 18 But in terms of Medicaid itself, what the 19 County has done, is created a Medicaid fraud unit. 20 Because, any county can look at Medicaid 21 providers within its purview, but without the 22 special legislation that's been put in place, 23 counties can't look at individuals who may be, you 24 know, using Medicaid fraudulently. 25 The County has a unit at this point. 1 A few months ago, they headed -- the person 2 who used to be the auditor for the county was named 3 director of that unit, and the County is looking at, 4 you know, reducing Medicaid costs. 5 Even though there's a cap, there may not be a 6 direct impact for Erie County; but, again, looking 7 at those kinds of costs, and putting the enforcement 8 out there, ultimately, may reduce everybody's costs 9 in the future. 10 SENATOR GRISANTI: And there was also talk 11 that we had in -- since January, and things that 12 we've done, this was just enacted in the 13 '13-'14 budget: The collaboration between the 14 Office of Medicaid Inspector General 15 [unintelligible], and local [unintelligible] service 16 district, by requiring [unintelligible] to develop 17 training materials, identifying fraud, abuse; to 18 meet quarterly with local service districts; develop 19 a work plan for such collaboration; increases, from 20 10 to 20 percent of local share of savings resulting 21 from the Medicaid recoveries under the County 22 demonstration program. 23 Is that something that is being implemented 24 right now? 25 KEN VETTER: Well, I think, with the Medicaid 1 fraud unit, I think Erie County is one of the pilot 2 counties that got, maybe, a bit of a head start on 3 it; so, they're really looking to do something. 4 I mean, we haven't had a progress report on 5 that; but then, again, the unit is relatively new, 6 and it takes a little bit of time to organize the 7 unit, and get out there, and, you know, find these 8 pockets where, you know, there are instances of 9 fraud. 10 So I think the County is working on it, we've 11 endorsed that, and, you know, we're looking forward 12 to them doing a good job in that [unintelligible]. 13 SENATOR GRISANTI: And we know that because 14 [unintelligible] by Senator Gallivan, that with the 15 pension reform, the new Tier 6, eventually, you 16 know, that's going to take some time. 17 But over 10 years, 20 years, 30 years, there 18 should be significant, significant savings, not only 19 in the county, but across the state, in all 20 municipalities, with regard to that, that it 21 actually gives some relief to taxpayers. 22 What do you see right now, for -- I take it, 23 have we seen an increase in sales tax with 24 individuals coming over from Canada -- 25 KEN VETTER: Oh, yeah. 1 SENATOR GRISANTI: -- and doing shopping? 2 KEN VETTER: I mean -- yeah, I guess, to me, 3 that's two different questions. 4 We are seeing an increase in sales tax, that, 5 sales taxes this year are probably going to be 6 between 10 and 15 million dollars higher than last 7 year. 8 The budget's, you know, $426 million. 9 Hopefully, it will come in at about budget 10 for this year. 11 It increased by about $10 million last year 12 as well. 13 So I think the sales taxes are increasing. 14 Would people like to see sales taxes increase 15 a little bit more? The answer is probably yes. 16 But they are increasing. 17 I mean, in terms of Canadians shopping, 18 again, these aren't -- I used to do studies at the 19 partnership, about, what comes from where, and the 20 economic-development issues. 21 You know, this is not extremely scientific, 22 but just a little heuristic analysis: Probably 23 about 4 percent of the sales-tax revenues in 24 Erie County come from Canadian shoppers, based upon, 25 you know, a study that was done by the 1 Convention and Business Bureau. 2 We just took the numbers and extrapolated 3 from there. 4 So I think Canadian shoppers do help. 5 But, really, what tends to happen, when more 6 cars are sold, and, unfortunately, for a lot of 7 people, when gas prices -- gasoline prices go up, 8 everybody has to get to work, everybody's got to get 9 to school, the buses have to run, gasoline prices go 10 up, sales-tax revenue tend go up as well. 11 SENATOR GRISANTI: What do you see right now 12 that we can do, to take back from these hearings, 13 and we can try to do, legislative-wise, which would 14 be even more beneficial with regards to, not only 15 Erie County, but what you feel would benefit other 16 municipalities across the state of New York, that's 17 either a mandate, or something else that's 18 different, that has been a burden and placed on? 19 JIM SAMPSON: Well, I guess -- I -- again, 20 I'd guess I'd looked to -- there is an early warning 21 system that's in place at this point, that wasn't 22 when the city of Buffalo, and then, later, 23 Erie County, you know, had started off with a 24 control board. 25 I think having that early warning system, 1 and, really, I guess, from my perspective, again, 2 I've been in the municipality, you know, the 3 45 cities, towns, and villages, from not being in 4 government, to try to do something that would 5 benefit the municipalities, like, you know, if you 6 can bring efficiency-grant money, if you can reduce 7 borrowing costs, if there are specialized items. 8 And I completely agree with Chairman Sampson, 9 nobody wants a control board. I mean, I don't think 10 there's anybody that jumps up and down and says, 11 Wow, it's great, these guys are here. 12 But I think, you know, it's been a financial 13 and organizational benefit to the County, and I 14 think there's acceptance because of that. 15 And I think, you know, like anything, you 16 know, business, government, you know, a carrot and a 17 stick, combined, can get you more than one or the 18 other. 19 SENATOR GRISANTI: Appreciate it. 20 Appreciate, Jim, and Ken, you being here 21 today. 22 I appreciate the [inaudible]. 23 SENATOR MARTINS: Thank you. 24 You know, the whole idea about early warning 25 system was obviously prudent. 1 We're appreciative of that. 2 We had had some discussions with the 3 Comptroller's Office, and the criteria, we can 4 disagree on the various factors that they use in 5 coming up with it, but the fact that we have an 6 early warning system is an incredible positive, 7 especially in light of the developments over the 8 last month or so. 9 As a sponsor of the financial restructuring 10 board, in the Senate, the ability to come in, with a 11 board that has a certain level expertise, and 12 provide incentives for that local government to 13 address some of their concerns, I felt was unique. 14 Certainly, I don't know of another state in 15 the country that has approached this issue quite 16 this way as a means of trying to prevent the need 17 for a control board. 18 So, I do believe that we've taken preemptive 19 steps over the course of this year to address these 20 issues. 21 Even before Detroit was in the situation that 22 they're in now, before they filed for bankruptcy, 23 the State had already taken these steps. 24 But one of the concerns, obviously, is that 25 I do believe that, eventually, we are going to have 1 other municipalities in a position where they're 2 going to request, or there's going to be a need, for 3 a control board. 4 And you mentioned that there had been some 5 difficulties between the authority and the County, 6 probably, more specifically, the executive in the 7 past. 8 Can you elaborate on that? 9 Was that structural? 10 Was it -- did it have to do with the function 11 of the board itself? 12 Is it -- was it an issue of personalities, 13 where, perhaps, we shouldn't extrapolate from that 14 friction? 15 'Cause -- or was it a combination of two? 16 Is there something objective that we, as a 17 committee, can take from that friction, in, perhaps, 18 detailing a future control board in a certain way? 19 JIM SAMPSON: I think it's probably all of 20 the above. 21 And, again, one of the things we tried to do, 22 after I was appointed, was remove that adversarial 23 kind of relationship that had existed -- We're here 24 to, you know, catch you, and to control you -- and 25 more one of, how can we work collaboratively to 1 understanding our authority, but also being 2 respectful of the fact that you have a 3 county executive who is elected by the majority of 4 the citizens of the county. 5 You know, how do you go about structuring 6 this relationship where it's not this intense 7 political kind of conflict, but it really is 8 directed towards, how do you serve the citizens of 9 the county? 10 And I had a friend tell me not too long ago, 11 "I don't hear anything about the control board 12 anymore." 13 And that's a good thing. Right? 14 And, I have to give 15 County Executive Poloncarz a great deal of credit, 16 as well as his staff, who we've collaboratively 17 worked just to tone that down. 18 And, we're respectful of his position, and 19 he's an elected official. And, they understand our 20 authority and the legislation. 21 But I think it's how the chairman of the 22 Authority approach it, as well as the elected 23 official, and how do you find that sort of common 24 area where you can be respectful of each other's 25 positions? 1 And I've told the County Executive and his 2 staff, How can you use us to help you govern more 3 effectively? 4 And, so, when credit is to be given, it goes 5 to the County Executive. 6 And we understand we're here to serve the 7 county residents. 8 So, I think it's all of the above. 9 SENATOR MARTINS: And, so, the control board 10 functions as the de facto worst-case scenario. 11 In the event that things break down, it 12 allows, I guess, the government, the county 13 government in this case, the flexibility of being 14 able to take certain positions, negotiate in a 15 certain way, because the last thing the County 16 wants, perhaps the last thing that our 17 public-employee unions want, is the imposition of a 18 hard control board. 19 JIM SAMPSON: Right. 20 And I think you also -- one of the things 21 that we've been working -- we worked really hard at, 22 is to be above the political fray, and, you know, 23 not to get drawn into a political dialogue and 24 debate, but really focus on what our job is. 25 And, you know, Ken and his staff have done a 1 very, very nice job of that. 2 And it's always, you know, How do we remain 3 neutral and objective, and not just be another 4 political entity in the community? 5 SENATOR MARTINS: As far as the multi-year 6 planning cycle, the four years of planning, I think, 7 you know, if there's a common theme that I've heard 8 thus far, it's that; it's the idea that we do need 9 to take a much more proactive long-term approach 10 towards planning so that our budgets don't come on 11 as a surprise. 12 In a political reality, where many of our 13 elected officials are on two- or four-year cycles, 14 and are more than willing to kick the can down the 15 road, the idea of planning over a multi-year cycle, 16 as they do in the business world, certainly makes a 17 lot of sense. 18 And, certainly, your recommendation mirrors 19 that of some of the other communities. 20 Whether or not there should be a rigid 21 approach to that, and whether or not there is need 22 for the imposition of a standard, statewide, to 23 every municipality, and every village, town, 24 authority, district, county, is, I guess, something 25 to be discussed; but, certainly, the idea of a 1 multi-year model that anticipates some of these 2 items, and addresses them, I think is certainly long 3 overdue. 4 Senator, any other questions? 5 KEN VETTER: Well, Senator, if I could, just 6 for -- I mean, I think this is -- this meeting is 7 in, you know, the context of the city of Detroit. 8 Actually, I was a finalist to be the finance 9 director for the city of Detroit years ago. 10 Really excited, I never got the job. 11 Kwame Kilpatrick would have been my boss. 12 I -- you know. 13 SENATOR GRISANTI: [Unintelligible.] 14 KEN VETTER: Nice enough guy, but I'm not 15 following him to Dallas. 16 But this -- even back then, I -- and, again, 17 this goes to the reporting, the early warning 18 system, the forecasting, even back then, and this 19 was, you know, I think nine or ten years ago, that 20 the city of Detroit was facing a $300 million 21 deficit in a $1.8 million budget, and they didn't 22 seem too upset about it. 23 That's the part that really scares me. 24 SENATOR MARTINS: Which is again the issue, 25 that if you have state government, that should be 1 more proactive. 2 And, so, if you have an early warning system, 3 and you do have a municipality that is going off the 4 proverbial cliff, and is doing so willingly, and 5 continues to do so, you know, one of the questions, 6 obviously, for -- from a policy standpoint, and a 7 broader policy standpoint, is at what point should 8 the State interject itself, and not allow that to 9 happen? 10 And that's a very difficult situation, 11 obviously, in a democracy as we have, with 12 democratically elected officials. 13 But the reality is, under that scenario, 14 where you do have that kind of deficit spending, and 15 you do have that kind of accumulation of debt over 16 time, it does require some steps, on behalf of the 17 State, to intercede on behalf of one of its 18 municipalities. 19 We're just trying to figure out where that 20 line is. 21 JIM SAMPSON: I would just, talking about 22 Erie County specifically, and the current 23 County Executive, I think he gets that. 24 Even in these difficult times, and, you know, 25 I don't know want to do a political stump speech 1 about Erie County, but, we still have one of the 2 lower tax rates -- property tax rates in the state. 3 We do have the benefit of sales tax, but as 4 Mr. Vetter indicates, it probably doesn't -- the 5 Canadians don't contribute quite as much as we would 6 like them to do as we see all the Ontario license 7 plates. 8 But even in all of that, this county is 9 currently operating in the black. 10 It's probably going to realize a small 11 surplus at the end of the year, without going into 12 the fund balance. 13 So -- and I do think a lot of that has been 14 generated by the County Executive and his staff, and 15 they are very, very sensitive to just the dynamic 16 that you're talking about, and not losing sight of 17 the urgency of operating in a very responsive kind 18 of way. 19 And I think that's one of the reasons our 20 relationship with the administration has been very 21 positive. 22 SENATOR MARTINS: Well, we appreciate you 23 gentlemen testifying. 24 Senator Grisanti, Senator Gallivan, any other 25 questions? 1 Gentlemen, thank you very much. 2 JIM SAMPSON: Thank you. 3 KEN VETTER: Thank you. 4 SENATOR MARTINS: Next witness this morning 5 is Donna Estrich, commissioner of administration and 6 finance for the city of Buffalo. 7 Good morning. 8 DONNA ESTRICH: Thank you. 9 Thank you very much. 10 SENATOR MARTINS: Wonderful to see you here. 11 Thanks for joining us today. 12 Certainly, I know there's a lot -- or, 13 there's something else going on in Buffalo today; 14 and, so, it's great to see you here. 15 Thanks for joining us. 16 And, you know, it is a -- an extraordinary 17 thing, Buffalo has come a long ways from where they 18 were even ten years ago, whereas, many of our cities 19 and municipalities across the state, and, certainly, 20 in Upstate New York, are going through some rather 21 difficult times, and may benefit from the 22 experiences that the City has had in coming through, 23 you know, its crisis itself. 24 We were hoping you could provide us with some 25 insight on that. 1 DONNA ESTRICH: [No audio.] 2 Thank you. 3 All right, thank you very much. 4 Well, I have a short little testimony, and 5 then I'd be glad to talk and answer any questions. 6 Mayor Brown has worked hard to maintain the 7 fiscal progress in the city of Buffalo. 8 We've had some reductions in our AIM money 9 and our restore money from the State. 10 We always could use more money, and we've 11 had, probably, a reduction of almost $5.8 million, 12 on an annual basis, from our high of $167 million. 13 We have kept our budget very flat. 14 We try -- over the last few years, we've 15 increased it, on an average, of 2 percent. 16 We've used that with watching, are we hiring 17 people? Our contracts. 18 The pension reform has just been reflected in 19 the current year, so, hopefully, that will go up in 20 a stronger piece in following years, and, hopefully, 21 there will be other pension reforms down the road. 22 Health care, one of the things that had been 23 mentioned are the a four-year plans. 24 When the control board came on in 2003, we 25 had started doing our four-year plans, and that was 1 one of the red flags that came out, that we had gone 2 to single health coverage in 2004. And, we just 3 started to do different forms of paying for our 4 health care, recognizing how the increased costs on 5 that. 6 We also work with our unions, and it's been 7 acknowledged by them, that they have to start 8 paying, and they have to start paying higher copays, 9 and look at their health care a little differently. 10 So that's been helpful in the long term. 11 The Mayor's fiscal discipline, his 12 conservative budgeting and the management practices 13 have led to a stronger Buffalo. 14 Working with the Comptroller's Office and the 15 Fiscal Stability Office, as the Comptroller stated, 16 we've increased our rating from the rating agencies 17 up to "A." "A" level for all three of them. 18 And, of course, that's helped us in our 19 borrowing and the rates of borrowing. 20 The Mayor is very concerned about property 21 taxes. He's been maintaining a property tax for the 22 last eight years. 23 He's actually reduced it 15 percent for 24 homestead, and 28 percent for commercial properties. 25 He's very concerned about struggling 1 families, and he wants to work hard not to raise 2 property taxes. 3 Some of this has come about in development in 4 downtown Buffalo. You can see all the cranes that 5 we haven't seen in years and years. 6 There's approximately $1.7 million in 7 development and investment in the city of Buffalo 8 currently. 9 Stabilizing our neighborhoods, the 10 demolitions have been very important to the Mayor. 11 We've used our efficiency money for 12 demolitions. 13 One of the things that would help us, also, 14 is the asbestos fee. 15 We spend almost $10 million just in 16 asbestos-fee payments, and that would help us if we 17 didn't have to pay that, to do more demolitions 18 throughout the city. 19 SENATOR MARTINS: Well, that's a very 20 important issue, both to Senator Grisanti and 21 Senator Gallivan, and myself, coincidentally, in 22 trying to address that issue. 23 That actually came to my attention when I 24 came to Buffalo for a hearing, just about a year 25 ago, and the Mayor had brought that up. 1 So, I know we passed it in the Senate, and 2 we're hopeful that that will come around. 3 DONNA ESTRICH: Right, and that would benefit 4 the city greatly also. 5 We need reoccurring revenues. 6 You know, we have tried to get some -- the 7 vehicle, what is it? -- the vehicle for moving 8 violations, that the city is able to adjudicate that 9 and receive from the benefit of that. 10 We send money, obviously, to Albany. And, 11 perhaps, if some of that was reduced and kept in the 12 local economy, that would benefit the city also. 13 You know, with our increasing pension and 14 health-care costs, the Mayor wants to continue in 15 the economic growth of Buffalo that he's worked so 16 hard to accomplish. 17 We appreciate your help and your support, and 18 we just hope that there is some thoughtful, some 19 achievable, and some mandate aid. 20 SENATOR MARTINS: I certainly appreciate 21 that. 22 You know, one of the -- one of the concerns 23 we hear often, at least I hear often, is that there 24 needs to be more municipal aid from the State to our 25 local governments, on every level. 1 And my concern is always, well, that would be 2 great, but it's the same taxpayer that's paying it. 3 And whether they're paying for it from their 4 right pocket or from their left pocket, it's still 5 being paid. 6 Whether it's to the State, and then coming 7 back to a local municipality, or whether it's being 8 paid directly to the local municipality, the 9 question has always been: 10 How do we get beyond that? 11 Are there points where we can work together 12 to create some efficiency? 13 Are there areas in programs that the City 14 administers, that is a State mandate, that you would 15 rather have us consider eliminating, or perhaps 16 isn't it necessary? 17 Because if there's one thing that I've seen, 18 it's that these programs tend to be piled one on top 19 of the other without ever having an opportunity to 20 go back and reevaluate the viability of those 21 programs that were passed in the past. 22 And we just passed a new program, without 23 actually looking at the previous three or four, to 24 see whether or not they should be retooled, 25 revamped, or eliminated altogether. 1 And so, what I would hope, and if there is an 2 opportunity, certainly I would welcome it from the 3 City, if you could provide us with, perhaps a 4 thought, as to perhaps some legacy programs, some 5 historic programs, that have been state mandates in 6 past, but may not necessarily reflect the needs of 7 the residents today, or the needs of the city today, 8 that we should consider eliminating as a means of 9 freeing up those resources for something else. 10 DONNA ESTRICH: Okay, well, some of the -- 11 one of the things we have, is we have to identify 12 lienholders when we go to sell properties. 13 And we have to -- the City does that, 14 approximately, with letters and notices, six times. 15 And then we have to do it multiple times, through 16 the State mandate, additional multiple things, with 17 certified mail. 18 And, I mean, that whole process is an extra 19 million dollars, every time, every year, when we try 20 to sell and rent properties. 21 SENATOR MARTINS: And, again, that -- that -- 22 just the level of red tape, sometimes you scratch 23 head and wonder why you're going through all of 24 those different hoops and doors and windows, when 25 you know what the result is, you know what you're 1 dealing with, you're being delayed, and you're being 2 forced to do -- absorb all these additional costs. 3 DONNA ESTRICH: Notify, right, anyways, and, 4 we publish notifications. 5 And, I mean, that adds another layer and 6 another million dollars to our costs. 7 SENATOR MARTINS: You know, if there are 8 items like that, and, certainly, I'm not going to 9 ask you, you know, right now, and I certainly don't 10 wish to put you on the spot that way, but if there 11 are items like that that you would like to us 12 consider, and, certainly, things that we can go 13 back. 14 And, tangible items, that's a million 15 dollars. It's a tremendous amount of money for the 16 city of Buffalo. 17 I'm sure it's a tremendous amount of money 18 for every other city a and municipality similarly 19 situated throughout the state. 20 And if we can get those thoughts from our 21 municipal partners -- local municipal partners, we 22 can actually start moving that ledger forward. 23 So I do appreciate that. 24 DONNA ESTRICH: We would be glad to put a 25 list together for you, and the impact it would have 1 on the city of Buffalo. 2 SENATOR MARTINS: Thank you. 3 Thank you very much. 4 Senator Gallivan? 5 SENATOR GALLIVAN: Thank you for being here 6 today. 7 My question has to do with Buffalo schools, 8 which I know does not fall under your purview, but, 9 it's been talked about several times today. 10 So, we have a billion of taxpayer dollars 11 going to -- going to a district that, by all 12 measures, is not performing the way that it should 13 be, which, of course, I understand your 14 administration has -- or, the Mayor's administration 15 has no role in there. 16 DONNA ESTRICH: Correct. 17 SENATOR GALLIVAN: We know -- we've spoken of 18 the legislation sponsored by Senator Grisanti, that 19 we've tried to advance, and we have advanced, in the 20 Senate. 21 It has not been advanced in the Assembly at 22 this point in time. 23 But my -- I guess my question is, is, and you 24 may not able to answer: The Mayor is the 25 chief executive officer of the city of Buffalo, and, 1 I guess the steward of the taxpayer dollars, and 2 working with the comptroller, working with the 3 council. 4 Should the Mayor have a role in the school? 5 DONNA ESTRICH: The Mayor has asked, since he 6 became Mayor in 2006, to have a seat at the board. 7 So, yes, he definitely would like to have a 8 voice in how their money is spent. 9 SENATOR GALLIVAN: And where do you think, if 10 you're able to answer, the approval of that spending 11 in the budget that, of course, we want to be more 12 transparent, where should that be placed? 13 Should it become part of the city 14 administration and the city budget, and maybe voted 15 on by the council; or completely separate, similar 16 to -- similar to the suburban schools, where it 17 functions separately but, yet, it still goes to the 18 citizens for a vote? 19 I'm really curious of your thoughts, and what 20 may achieve better results, which isn't the subject 21 of the hearing today, but better fiscal management. 22 DONNA ESTRICH: I would think it would be 23 beneficial if it did get combined with the city, and 24 then there was the oversight of the mayor, the Board 25 of Ed, and the council, so everybody was aware of 1 what was going on, and what was being voted on, and 2 what is in the budget. 3 SENATOR GALLIVAN: Thank you. 4 SENATOR MARTINS: Senator Grisanti? 5 SENATOR GRISANTI: Thank you, Senator. 6 Donna, you know, I know that since taking 7 your position, I think, in the past, that you're 8 there, I think you do a wonderful job. 9 I think by having Comptroller Schroeder 10 there, I think it's fantastic for the city. 11 I'm -- I was -- you know, I'm, basically, a 12 lifelong resident of the city. 13 I see a bond rating finally change, and be 14 positive. I think that's fantastic. 15 And it's funny, because you mentioned a 16 couple of things that I have actually been pushing 17 for, and that is, the adjudication of traffic 18 offenses, being able to plea bargain, the city of 19 Buffalo actually gets to keep more of those 20 proceeds. 21 We know, in Tonawanda, Kenmore, Amherst, you 22 get a ticket [unintelligible] the parking, you get 23 to keep the fines, and so on and so forth, and there 24 would be more municipal aid that could be used 25 for -- 1 DONNA ESTRICH: Certainly. 2 SENATOR GRISANTI: -- whether it's for 3 police officers, for cameras, more money possibly to 4 the community block clubs and grant programs, so 5 they can, you know, actually be part of the 6 neighborhood even more so. 7 That's something that we're trying to push. 8 And I know that we've received, actually, 9 home-rule messages regarding the traffic 10 adjudication, so we're pushing forward on that. 11 Moving the school-district vote, from May to 12 November, would save the City of Buffalo money with 13 regard to having an extra election. 14 And the one thing you mentioned, the 15 million dollars with regards to the foreclosure 16 process, and having to put out the notices: 17 I would imagine as well, with the -- 18 And you may not be able to answer this, but 19 I'm sure you know about it. 20 -- the distress of some of the areas in 21 Buffalo due to bank foreclosures that kind of put a 22 property in limbo, where you're -- either you're not 23 getting taxes paid for by the bank; either they're 24 just walking away, because there's the disconnect, 25 where the homeowner may not, or if the homeowner 1 can't, make the mortgage payment, they get a letter 2 from the bank, so, not knowing, they'll leave, and 3 then the property becomes vacant. 4 And time goes on, either somebody will go in, 5 there will be vandalism. They'll steal plumbing. 6 They'll steal electrical. 7 And then the bank will come in eventually, 8 and say, "Hey, we don't really want the property 9 either," and they kind of just walk away from it. 10 Do you see that being a problem? 11 Because, number one, then it's something 12 that's on your foreclosure list, because the banks 13 have walked away from it, and, you have to use your 14 city resources to upkeep the property, cutting the 15 grass, sending a bill to the various banks to see if 16 they're going to do it. 17 What do you see that could be done 18 differently in that revenue -- or, in that area, not 19 by just individuals, but in the bank-foreclosure 20 area? 21 What do you see is the problem? 22 DONNA ESTRICH: Well, it's a combination of 23 what you said, but, also, sometimes the banks 24 continue to pay the taxes, but they don't maintain 25 the building, so we cannot -- we don't have the 1 right to go in and maintain it. 2 I mean, we can board them up and charge them 3 for board-ups, but they don't necessarily pay that. 4 So we can't go in, we can't demolish the 5 property if it's in bad condition, because it's 6 still a privately owned home. 7 SENATOR GRISANTI: So a lot -- 8 DONNA ESTRICH: So if there was some way to 9 force the banks to maintain their property, in 10 addition to paying their taxes. 11 SENATOR GRISANTI: Okay, see, now, to me, 12 that doesn't make any sense, because if they're 13 paying the taxes, you would think they'd want to 14 maintain the property in order to resell it and put 15 it on the market, to have families live there, to 16 strengthen the community, you know, strengthen the 17 community, by number. 18 DONNA ESTRICH: Right, and by not doing that, 19 then they weaken neighborhoods that they're in also. 20 SENATOR GRISANTI: And do you see that that 21 is a -- that is also a problem as well, in that 22 area? 23 DONNA ESTRICH: Correct. 24 SENATOR GRISANTI: Okay. 25 And I know that Senator Martins said that, 1 you know, other areas he could see, whether a change 2 in red tape or a change in what the State is 3 mandating on the City, to have something done, 4 advising us what those are. 5 We have -- you know, it may not affect all 6 municipalities, but I think it does affect some 7 [unintelligible]. 8 Since January 1, 2011, the Senate has 9 adopted, and it has been passed, a wide range of 10 mandate-relief proposals. Upwards of over 11 sixty-three have become law since 2011. 12 So -- but that, you know, is not only 13 municipalities; school districts, towns, villages. 14 That's great. 15 But other things that you know of, getting 16 that information to us is helpful. 17 And like Senator Martins and Senator Gallivan 18 said, it's great that, you know, bond ratings are up 19 at the -- in Erie County, with their fiscal 20 stability board, and the control board here, it only 21 shows positive results, but I think it could be a 22 model for other cities and municipalities across the 23 state. 24 So, I want to thank you for being here and 25 testifying, and for your great work, and for working 1 with Comptroller Schroeder in getting things the way 2 they are in the city of Buffalo, considering I live 3 here, and I see it. 4 DONNA ESTRICH: One thing that I have to say: 5 Working with our current administration of the 6 fiscal control board, they're been very helpful. 7 They've always provided another set of eyes. You 8 know, they've come up with some best practices, 9 offered them to us. 10 And, so, we've worked very well together. 11 SENATOR GRISANTI: Thank you. 12 Thank you very much. 13 SENATOR MARTINS: Thank you. 14 Our next witness is from the city of Corning, 15 the city manager, Mark Ryckman. 16 Sir -- 17 MARK RYCKMAN: Good morning. 18 SENATOR MARTINS: -- good morning. 19 Thank you -- or, good afternoon. 20 Did I get the name right? 21 MARK RYCKMAN: Excuse me? 22 SENATOR MARTINS: Did I get the name right? 23 MARK RYCKMAN: Yes, Ryckman, that's correct. 24 SENATOR MARTINS: Very well. 25 Thanks for joining us. 1 I'm looking forward to, just, your insight on 2 the topic we're discussing this morning. 3 Tell us a little bit about the city. 4 MARK RYCKMAN: Sure. 5 I prepared a statement today. I'll walk 6 through it with you, and I'll leave copies. 7 And, I appreciate the opportunity to be here, 8 and to share with you those concerns of fiscal 9 stress. 10 And I think the concerns I have are fairly 11 generic to most of the municipalities across the 12 state. 13 We're a little different form of government 14 in the city of Corning. 15 We have a city-manager form of government. 16 I'm the chief executive officer, and, I'm the 17 past president of the New York State City and County 18 Management Associations, so I'm pretty fairly well 19 versed in the fiscal burdens and constraints 20 confronting our municipalities. 21 And, as we've watched the conditions in 22 Detroit over the years, that you mentioned 23 previously, Senator, that we're all well aware of 24 those. 25 We've also witnessed the other high-profile 1 municipal bankruptcies in Stockton and 2 San Bernardino, California. 3 And, before we find some of our New York 4 municipalities in the same situation, I'm very 5 encouraged by these hearings, and the reforms that 6 people are trying to make, to give us the latitude 7 to address these challenges. 8 Concerning the economy itself, as the economy 9 begins to recover nationwide, New York still seems 10 to be lagging behind the nation. 11 Upstate continues to trail downstate. 12 The New York State Department's of Labor's 13 Division of Research and Statistics came out with a 14 report in July, that private-sector employment in 15 the 52-county Upstate New York region increased by 16 22,000, or, .9 percent, for the past 12 months. 17 And the upstate region's private-sector job 18 growth of that .9 percent lag growth in the 19 10-county downstate region, which increased 20 2.5 percent; so, we're less than half up here. 21 Statewide private-sector job growth was up 22 1.8 percent, compared to 2.1 percent nationwide. 23 So, the slow economic growth continues to put 24 some strain on our municipalities, especially here 25 in upstate. 1 I greatly appreciate you mentioning earlier 2 about the partnership with local governments, 3 because it's really a shared responsibility. 4 Governing in these difficult economic times 5 requires new approaches and hard decisions. 6 And at all levels of government, we share 7 that responsibility to provide fiscally sound policy 8 direction and management decisions. 9 And to that end, in Corning, we've made 10 difficult decisions to weather the economic downturn 11 and still meet our financial obligations, including 12 paying for the rapidly paying -- rapidly escalating 13 pension payments and health-insurance premiums, 14 which I'll mention in a minute. 15 In '97, when I was appointed as the 16 city manager in Corning, we had 131 full-time 17 employees. 18 And during the 2002-2003 recession, I reduced 19 our full-time workforce to 115. 20 This helped regain our foothold, but only 21 temporarily. 22 And, in 2010, in response to reduced sales 23 tax, State aid, and gross-receipt tax revenues, as 24 well as these escalating pension and 25 health-insurance costs, I further reduced our 1 workforce to 103 full-time employees. 2 And during both rounds of workforce 3 reductions, the majority of these positions were 4 reduced in the form of direct layoffs, not through 5 attrition, so these were hard layoffs. 6 And this represents a 21 percent reduction in 7 our city workforce between '03 and 2010. 8 In addition to the workforce reductions, the 9 city council and my management team have continued 10 to exercise extreme caution on our expenditures. 11 We've renegotiated sales-tax allocations with 12 our county government; 13 We've reduced the size of our fleet; 14 We've restructured certain department 15 operations to improve efficiencies and costs; 16 And we continue to take those prudent actions 17 to control costs that are under our control. 18 At this point, we've made significant 19 sacrifices at the city of Corning, but we're seeking 20 mandate relief from the State Legislature in order 21 to sustain our financial stability. 22 Comprehensive reform has been elusive, in our 23 opinion, replaced mostly by offers of technical 24 assistance. 25 So, for example, the Comptroller has created 1 the fiscal-stress monitoring system; and while 2 I applaud the Comptroller for trying to quantify 3 indicators of fiscal stress, much of that 4 information provided by the monitoring system is 5 already recognized by municipalities in our 6 "Management and Discussion Analysis" section of our 7 financial statements, or by our bond-rating 8 agencies. 9 The Comptroller is offering technical 10 assistance in terms of budget reviews, financial 11 planning, and training. 12 In Corning, we have a professional form of 13 government. 14 We have the ability to review our budgets, to 15 make sure that revenues are realistically meeting 16 expenditure projections, and that we're structurally 17 balanced; 18 We have financial-planning capabilities; 19 We regularly attend training. 20 So, we're not in need of this type of 21 technical assistance, but we're in need of mandate 22 relief to reduce our costs. 23 Concerning the newly created financial 24 restructuring board, instead of reforming the 25 current compulsory-interest arbitration process 1 that's set forth in the Taylor law, the Legislature 2 and Governor have established an elective 3 alternative binding-arbitration process, which was 4 talked about earlier today. 5 This alternative process seems to break down 6 as an effective alternative, on the onset, since 7 it's only available if the local bargaining units 8 agree to participate. 9 So, if the local bargaining units, the 10 local -- our local unions don't agree to 11 participate, the parties must use the current 12 compulsory-interest arbitration process to resolve 13 our differences. 14 And it's this process that I think is really 15 in need of desperate reform. 16 The current statute requires arbitration 17 panels make their decisions solely based on the 18 evidence submitted by the parties at the formal 19 hearing. 20 And in reality, in Corning, it seems that the 21 determination of the panels that we've been before 22 reflects an extension of the mediation process, 23 rather than a weighing of the evidence that the 24 parties have submitted at the hearing. 25 And as a result, what we've experienced is, 1 the changes included in the panel's award tend to be 2 incremental, and they're not really sufficient to 3 counter the significant growth in these pension 4 payments and health-insurance costs. 5 So instead of instituting an elective 6 alternative, you know, we really think we need 7 reform to the Taylor law itself. 8 Most notably, I -- if we're looking for 9 solutions, I'd propose the Legislature consider 10 limiting the number of consecutive times the parties 11 can petition for compulsory arbitration. You know, 12 maybe two times consecutively. 13 Once the limit is met, the parties should be 14 required to utilize the legislative process hearing 15 that we have for other public-sector bargaining 16 units. 17 In addition, the term "ability to pay" needs 18 to clearly be defined, and should require a costing 19 of both parties' packages be placed in evidence. 20 Currently, costing of packages is not 21 required in the hearing stage of the 22 compulsory-interest arbitration. 23 We need to define those costs, and the 24 costing should include all economic items, such as 25 wages, payroll taxes, health insurance, pensions, 1 and the panel's awards should not impose cost 2 increases which would require a reduction in 3 municipal services or an increase above the State's 4 mandated property-tax cap. 5 I think local governments throughout 6 New York State are willing to make difficult 7 decisions if we're given the latitude by the 8 Governor and Legislature to manage our financial 9 affairs unencumbered by State mandates. 10 And getting back to the pensions and health 11 insurance, I'd like to highlight those two areas, 12 because pension costs and health-insurance premiums 13 now jointly represent 23 percent of the City of 14 Corning's annual budget. 15 "23 percent of our budget." 16 So, part of our efforts in reducing our 17 full-time workforce were in response to these 18 alarming growth rates and pension payments. 19 In the city of Corning, our pension payments 20 increased 2,251 percent, from $48,000 in 2000, to 21 $1.14 million this past December, despite a 22 21 percent reduction of our workforce. 23 So we reduced our workforce 21 percent, and 24 since 2000, we have still seen our pension costs go 25 up over 2,000 percent. 1 The State Legislature created the new 2 "Tier 6" pension category as a means of controlling 3 long-term rates, which we applaud. 4 And, although that's imperative to long-term 5 stability, the new tier provides little in the way 6 of short-term relief. 7 So what we really need, in terms of pensions, 8 is we need predictable rates set on a multi-year 9 basis instead of the current annual year-to-year 10 calculations that are done. 11 A multi-year approach could use the concept 12 of banking, as expressed by the New York Conference 13 of Mayors, where overpayments during strong-market 14 periods could be used to cover the shortfalls in 15 slower economic times. 16 Other options proposed by NYCOM, that I think 17 are worth considering, are: 18 Reinstating the 3 percent employee 19 contribution for Tier 3 and 4 members who have 20 completed their tenth year of service, and that 21 would affect me. 22 I currently don't contribute to my pension, 23 which I think I should, but I don't have the ability 24 to do that under the current legislation. 25 And I think we need to allow municipalities 1 to opt out of the retirement system if they offer a 2 more affordable plan. 3 In terms of health insurance, the 4 health-insurance costs are also overburdening local 5 finances. 6 So in the city of Corning, our total premiums 7 for the current budget year are estimated at nearly 8 $3.2 million, with our employees and retirees 9 paying, on average, less than 1 percent of those 10 costs. 11 So health insurance alone represents 12 17 percent of our total budget. 13 And we estimate that these costs are going to 14 continue to increase at a rate which outstrips 15 inflation, and that these liability -- the liability 16 of our retiree health-insurance payments will 17 continue to deprive the City of necessary funds for 18 the provision of municipal service and needed 19 infrastructure repairs. 20 In Corning, our total expenditures for the 21 current fiscal year are estimated at 18.7 million. 22 At the same time, our liability for future 23 employee health-insurance benefits will top 24 30 million by this time next year. 25 So we have an, 18-, 19-million-dollar budget, 1 and 30 million in these legacy costs that we don't 2 have the ability to control. 3 We've been in interest arbitration with our 4 police union for the past several years, and in the 5 three consecutive arbitration processes, the awards 6 have not provided any substantial relief to these 7 escalating health-insurance costs. 8 We think that by requiring the arbitration 9 panel to address newly defined ability to pay 10 criteria, this issue, along with other economic 11 issues, would make the awards more objective. 12 And as it stands now, there is really little 13 incentive on the part of labor to look for more 14 affordable coverage as municipalities tend to 15 shoulder the majority of these increases. 16 Concerning the property-tax cap itself, 17 I applaud the effort. The property-tax cap was a 18 well-intended attempt to control ever increasing 19 property taxes at the local level. 20 However, the cap itself did not eliminate any 21 of our significant cost drivers, such as the 22 health-insurance-premium growth or the 23 pension-premium growth. 24 And we really think that the property-tax cap 25 will only be effective if coupled with substantial 1 relief from other mandates, the restrictions, that 2 are placed on us. 3 If we at the local level routinely adopt 4 expenditure levels under the cap without any type of 5 meaning mandate -- meaningful mandate relief, at 6 some point, we're going to face further reductions 7 of our full-time workforce or the loss of service or 8 the continued decay of our infrastructure. 9 Going forward, we need legislation which 10 prohibits the further enactment of statutory and 11 regulatory mandates, unless funding equivalent to 12 the cost of the mandates is provided to local 13 governments. 14 In addition, we think that the Legislature 15 should enact some type of sunset provisions on 16 current unfunded mandates, in order to allow them to 17 be carefully reviewed, to see if the mandates are 18 still necessary, and if they're meeting their 19 intended purposes, and they're financially stable -- 20 financially sustainable to local governments. 21 So in conclusion, thank you again for 22 allowing me to share with you my perceptions about 23 the fiscal constraints in New York municipalities. 24 I have this testimony in written form to 25 submit to you, to review more at your leisure. 1 Detroit and other high-profile municipal 2 bankruptcy filings, we think, should serve as a 3 warning, kind of a canary in a coal mine, reminding 4 us that policy decisions and management practices of 5 the past need to be reformed in order to address 6 both the fiscal challenges of today and those of 7 future. 8 And I do greatly appreciate your willingness 9 to hold these hearings and collect this valuable 10 input. 11 It's this type of dialogue, on an ongoing 12 basis, that I think is needed, so that we can relay 13 financial conditions of our municipalities to you, 14 so that you have the information you need when 15 you're making the difficult decisions at the state 16 level that affect us. 17 So thank you, Senators, very much, for 18 allowing me to be here. 19 SENATOR MARTINS: Thank you, Mr. Ryckman. 20 You know, the idea of these legacy costs I 21 think is important. 22 Certainly, most of our upstate cities, most 23 of the cities in north -- in the northeast of the 24 United States, are going through the pressures of 25 these legacy costs today. 1 When we were in Syracuse two days ago, the 2 costs -- the City's costs for retirees is actually 3 higher than the cost of their current employees, and 4 so it is -- it's sobering to understand how those 5 numbers play out. 6 They're actually paying more for people who 7 have already served, but, they're meeting their 8 commitment to the workforce that was made, and I 9 don't think anyone would argue against that. 10 I don't know if I heard it, but, the 11 workforce in Corning, do they contribute to 12 health care now? 13 MARK RYCKMAN: They do, but on average, it's 14 around 1 percent. 15 And, so, the problems that we've had are in 16 arbitration, with arbitrators unwilling to make 17 substantial movement. 18 The movement that we see in arbitrations 19 tends to be incremental, and -- but these 20 health-insurance costs are -- in most years, are 21 escalating exponentially. They're, like, 22 double-digit increases. 23 So, we think we need to reform that 24 arbitration process in the ways that I've talked 25 about, in order to provide more substantial relief 1 for the municipalities. 2 SENATOR MARTINS: That's for your fire and 3 police force? 4 MARK RYCKMAN: Correct. 5 SENATOR MARTINS: For your 6 non-emergency-service employees, are they 7 contributing or -- or are they part of that 8 1 percent? 9 MARK RYCKMAN: They're contributing, I'd say, 10 on average, their costs are around 5 percent; 11 they're higher. 12 They're still not where we would like them to 13 be, but we have the ability to -- we've had the 14 ability to begin moving them more in that direction. 15 SENATOR MARTINS: 'Cause you can negotiate 16 those as part of your collective-bargaining 17 agreements anyway? 18 MARK RYCKMAN: We can. 19 I mean, collective bargaining, as we all 20 know, is made up of -- you know, it's package 21 bargaining, essentially. Everything is weighed off 22 each other. 23 So it's -- you know, it's still a -- you 24 know, it's a difficult process, but we have more of 25 the ability. 1 With police and fire, we really need reforms 2 to that compulsory-entrenched arbitration process. 3 SENATOR MARTINS: Trust me, I did eight years 4 as a mayor in the village of Mineola, and was on the 5 executive board of NYCOM, and certainly worked with 6 NYCOM in putting together that pension-leveling 7 concept that you spoke about earlier, and I happen 8 to agree with you. 9 I introduced a bill that would do just that. 10 The whole idea of having these spikes in 11 pension costs makes very little sense in the real 12 world. 13 We all finance our homes over 30 years at 14 fixed rates. 15 We don't have annual, one rate, one year, 16 adjustable-rate mortgages because we want the 17 stability of having a long-term commitment, and 18 being able to provide for those. 19 MARK RYCKMAN: Correct. 20 SENATOR MARTINS: The only place where you 21 don't have that, by the way, is in the pension 22 system. 23 MARK RYCKMAN: Correct. 24 SENATOR MARTINS: I do believe that those 25 costs are coming down. That's just the reality of 1 how the pensions are calculated, but those costs are 2 going to come down; but, they are going to go up 3 before they come down. 4 And the relief is needed today, not three or 5 four years from now. 6 And so we're still working on that. 7 And part of what we did during the budget 8 this year was in that direction; providing our local 9 municipalities with the option of being able to ride 10 out -- literally, ride out that peak, so that they 11 could provide stability as we wait for those rates 12 to come back down, as they invariably will. 13 MARK RYCKMAN: Right. 14 Why we didn't take advantage of that in the 15 city of Corning is because, the -- as rates come 16 down, then we're -- under that proposal, we're going 17 to still be carrying some of those costs forward. 18 So we're trying to ride out the economic 19 storm without doing that; without borrowing for, 20 essentially, an operating cost. 21 We do appreciate the ability to have those 22 options, and for some municipalities that certainly 23 may fit. 24 For us -- for us, we just don't think it's in 25 our best interests to borrow at this time for 1 additional costs. 2 SENATOR MARTINS: Yeah, if you look at it as 3 borrowing, I know what you mean. 4 This particular option that was included in 5 this year's budget wasn't a borrowing, as much as it 6 was a limit on the increase and decrease, year to 7 year, of half a percentage point. 8 So if you were able to provide the kind of 9 stability that you're asking for; that is, year to 10 year, half-a-percentage-point difference, over time, 11 I think we could agree, that if we were to flatten 12 that pension cost, and you were able to plug in a 13 number, year to year, that would be far better, and 14 that you would be able to, not only ramp up, but 15 also ramp down, over time. 16 You would be able to continue to provide 17 essential services for the residents of Corning, but 18 at the same time, not overextend yourself by 19 borrowing against a future expense. 20 MARK RYCKMAN: Right, agree. 21 SENATOR MARTINS: And so that, I thought, was 22 the best, or the most important, part of the 23 pension-leveling features in the budget this year, 24 was that it did just that. 25 It was a longer-term commitment. You weren't 1 borrowing for ten years. 2 It was going to limit your increases to 3 half a point, and your decreases to half a point, 4 but provide stability, which is, by and large, 5 I remember from my time as a mayor, but, also, I've 6 heard from my colleagues in local government, 7 "That's what we want; we want to be able to provide 8 stability year to year." 9 And I think I heard you say that as well. 10 MARK RYCKMAN: Yes, I agree. 11 And, agreed, in good economic times, when our 12 pension payments were $48,000 for 131 full-time 13 employees, we agree that that's too low. You know, 14 we understand that there needs to be a floor. 15 There needs to be a floor and a ceiling, and 16 it needs to be predictable. 17 And I think, right now, that's what we're 18 experiencing, is that we haven't had that 19 predictability in these rates. 20 SENATOR MARTINS: I agree with you. 21 When we talk about mandate relief, I know 22 that, generally, that's a rather broad concept. 23 And, you know, we've mentioned, and you 24 mentioned, the binding-arbitration component to it. 25 Certainly, the Taylor law. 1 If there are particular items that are 2 affecting the city, specific items, maybe some 3 regulations that are impacting the city in a way 4 that affects you, that allows us some perspective in 5 terms of being able to eliminate some of those 6 costs, something as simple, sometimes, as reporting 7 requirements, red tape, so to speak, that we would 8 consider "red tape" in the private sector, but is no 9 less so in the public sector, if you could provide 10 us with some perspectives on those, that would be 11 very helpful as well. 12 MARK RYCKMAN: Sure. 13 You know, we experience all of those types of 14 things, you know, whether it's that we're 15 administering more of the STAR exemption through our 16 assessor's office. You know, I hear that common 17 complaint of, you know, the State adopted a STAR 18 program but the local assessors are administering 19 it. 20 I look at the WIC's law, and, you know, and 21 the costs with the WIC's law. 22 In Corning, we don't do, you know, a 23 significant amount of construction, so it hasn't 24 affected us too much. 25 I really think the biggest two drivers are 1 pensions and health insurance. 2 And we can talk about the other ancillary 3 items, but in the City of Corning's case, I think 4 that they're -- they pale in comparison to the real 5 issues, and that we really need to address pensions 6 and health insurance. 7 Those are the two big issues. 8 That's where we're going to see a noticeable 9 impact if we're going to control property taxes; and 10 not just control property taxes, but provide quality 11 services, because we can have cheap, but we might 12 not have the quality the public is expecting. 13 So, it's been very difficult to maintain our 14 service levels, cutting 21 percent of the workforce. 15 So, we're cutting costs, but at the same 16 time, we're also cutting quality, and I think 17 we're -- you know, we're concerned about that as 18 well. 19 SENATOR MARTINS: I do appreciate that. 20 And your overall budget for the city? 21 MARK RYCKMAN: Overall budget, general-fund 22 budget, is $15 million. With water and sewer, we're 23 up around $18 million. 24 SENATOR MARTINS: 18 million. 25 And your unreserved fund balance? 1 MARK RYCKMAN: Our true undesignated amount 2 is $1.4 million, so we're about, 8, 9 percent. 3 SENATOR MARTINS: Thank you. 4 MARK RYCKMAN: And our bond rating we have 5 increased through Moody's, from an "A3" to an "A1," 6 so, we're moving in that direction. 7 The question is: How long can we sustain 8 this in the short term, as we wait for the Tier 6 9 benefits to kick in, and we wait for some type of 10 reform to the Taylor law, so that we can begin 11 controlling the health-insurance costs? 12 SENATOR MARTINS: Thank you. 13 Senator Gallivan? 14 Senator Grisanti? 15 SENATOR GRISANTI: [Unintelligible.] 16 MARK RYCKMAN: Thank you. 17 SENATOR GRISANTI: There has been, I think, 18 some mandate relief that's been put forward in the 19 last year. 20 [Unintelligible.] 21 MARK RYCKMAN: Yes. 22 The CHIPS funding is critical. 23 I mean, our infrastructure, I mean, we're an 24 aging northeast community, and so the CHIPS funding 25 has been very beneficial. 1 We've recently adopted a 14-year 2 capital-improvement plan for street work, and we've 3 programmed in that CHIPS funding over that 4 14-year period. 5 That's very beneficial, and we greatly 6 appreciate it. 7 In the short term, we need more AIM funding. 8 That's something that's critical to us. 9 It's been reduced the past few years. 10 I think we have an understanding of that, 11 everybody needed to take a haircut. 12 We took a cut, and this year it was flat. 13 But going forward, we need to get back on 14 track with AIM increases; and, again, that needs to 15 be predictable too. 16 I think part of the problem we experience is, 17 that decision being made on an annual basis as we're 18 trying to put together our budgets, it's very 19 difficult. 20 If we could have a three- to five-year 21 outlook on AIM funding, I think it would be helpful 22 to us, from a planning perspective. 23 SENATOR GRISANTI: So, predictability 24 [unintelligible], as well as additional pension and 25 health premiums [inaudible.] 1 Are you seeing an increase in the job market? 2 Or -- 3 MARK RYCKMAN: Slowly in our area because, 4 Corning, Incorporated, is our largest employer; and, 5 so, slowly we're seeing that. 6 I think our unemployment rate is still, in 7 Steuben County, somewhere around 9, or just under 8 9 percent. 9 So, we're still experiencing high 10 unemployment, but, Corning, Incorporated, is, you 11 know, very stable, a very good employer. 12 And -- but I think businesses are looking for 13 this stability as well, and predictability. 14 If they want to make investments, they need 15 to understand: Where are we, as local government, 16 and are we financially stable, before they make 17 further commitments? 18 SENATOR GRISANTI: Thank you for your 19 comments. 20 MARK RYCKMAN: Thank you very much. 21 SENATOR MARTINS: Senator Maziarz, any 22 questions? 23 I want to welcome Senator George Maziarz, the 24 dean of the western delegation. 25 Good to see you. 1 SENATOR MAZIARZ: Thank you. 2 No. 3 SENATOR MARTINS: No? 4 Not at all. I heard someone else was in town 5 today. 6 I do appreciate it. 7 Just, if you would, for my own perspective: 8 How many city governments do we have in 9 New York State that have a city-manager form, 10 besides you and Long Beach? 11 MARK RYCKMAN: I don't know the exact number, 12 but I'd say we're probably in 50 to 60 of the 13 municipalities. And mostly you see some managers in 14 Westchester County, and then a little bit up here in 15 the Finger Lakes and Western New York. 16 SENATOR MARTINS: And one in Nassau County. 17 MARK RYCKMAN: And one in Nassau, yeah. 18 So you just don't see -- it's not as 19 prevalent. 20 I was formerly a city manager in Maine, where 21 it's a very prevalent form of government. 22 It's just not as prevalent here. 23 SENATOR MARTINS: Mr. Ryckman, thank you very 24 much. 25 MARK RYCKMAN: Thank you for having me. 1 SENATOR MARTINS: Next witness is 2 Brian Napoli, who is the supervisor of the town of 3 Ridgeway. 4 Supervisor, thank you. 5 Welcome. 6 Good afternoon, how are you? 7 BRIAN NAPOLI: What's that? 8 SENATOR MARTINS: Good afternoon. 9 BRIAN NAPOLI: Good afternoon. 10 SENATOR MARTINS: Thank you for joining us. 11 BRIAN NAPOLI: Thank you for inviting me. 12 I will, I guess, be speaking for the small 13 community. 14 We're a community of 6600 people, according 15 to the 2010 census. Most of our people are located 16 in the village of Medina in New Orleans County. 17 And we -- I'm taking, I guess, a little bit 18 of a different tact here. 19 I wasn't sure how long I would speak. 20 In fact, Senator Martins and I, we talked 21 before. I wasn't sure, I didn't know if you were 22 going to limit us to five minutes. 23 I was expecting a packed room. 24 But, anyway, in your packets there, I have a 25 short list and a long list. 1 I'll work from the short list. 2 SENATOR MARTINS: And we can review the long 3 list. 4 BRIAN NAPOLI: Yes. 5 SENATOR MARTINS: Thank you. 6 BRIAN NAPOLI: The long list is yours. 7 There's also some backup documents in there, 8 letters. 9 In fact, there's one from Senator Maziarz, in 10 support of one of our programs for Internet 11 broadband access, which is one of our concerns. 12 We talk about fiscal stress, I guess I'm kind 13 of jumping down the list here, but, it's one of the 14 ways we try to grow our community. 15 It's one of the four main questions that we 16 are asked when a potential employer comes in. 17 They want to know, "Do you have Internet 18 broadband access?" 19 And as I say, we are a small community. 20 There are places in New Orleans County that 21 do not have Internet access, period. 22 We're currently working, as a county, to try 23 and get it. 24 In fact, we've also had some interest from 25 Niagara County and Genesee County, because they -- 1 northern Genesee County and eastern Niagara County 2 are in the same predicament. 3 We have a, I guess it's a -- we have a 4 technical consultant who is working, basically, on a 5 volunteer basis. He has an engineering degree. 6 He's writing our grants, writing our proposals. 7 But this is something that we have run into 8 with the State, and this is, again, something that 9 I wanted it to bring up here. 10 The State has the New York Connect Program, 11 and it gives grants for building things, like, 12 Internet and broadband access. 13 The only problem is, it doesn't allow for 14 planning, which we kind of thought was 15 inconceivable. 16 And, in fact, we went to a meeting with them 17 in Niagara Falls, and they just told us: Well, it's 18 nice what you're doing, because we're trying to 19 plan, to know what we should spend before we go out 20 and do it. 21 And they said: Well, our program doesn't 22 allow this. 23 I guess the definition of the program is for 24 building, not for planning. 25 And we asked the two gentlemen that were 1 making the presentation: Okay, not to jump up here, 2 but, we'd like to speak to your boss. 3 And according to them, they wouldn't give us 4 a name. [Unintelligible.] Okay. 5 So, we continue doing, you know, what we're 6 doing, trying to look for other places to help. 7 It's not a lot of money. 8 What we're trying to do is just inventory the 9 towns, the county, as I say, along with Niagara and 10 Genesee, to know what we have before we go out and 11 apply for a grant to build, or to attract someone 12 in. 13 And this is a way we help grow our economies. 14 If we tell a potential employer, no, that we 15 don't have Internet broadband access, they basically 16 say, Well, thank you, and we'll let you know. 17 And we never hear from them again. 18 This gentleman before we, you had asked about 19 employers, or growth. 20 We've lost two main -- we are going to lose 21 one -- actually, two major employers. 22 The village of Albion is going to lose 23 JPMorgan Chase. They're closing their call center 24 and their processing center. 25 Also in the village of Medina, we have a 1 company called "Worthington Industries," which, it's 2 manufacturing. They're leaving. 3 So we've been hit, but, we're coming back. 4 Like one of the other folks said: This is 5 Western New York, you know, we come back. 6 But, anyway, that's one. 7 To go back to the starting point, and I'm 8 sure you've heard this before, the tax cap. 9 Basically, gentlemen, it hamstrings us. 10 Whatever the cap is in any one given year, 11 1 percent, 2 percent, whatever, and then we 12 receive -- and this is, jumps down to two along with 13 it -- we receive increases in the retirement system. 14 We've already been notified, and I think 15 there are two -- at least two letters in there, 16 that, for next year, there's going to be an 17 18 to 20 percent increase in our retirement-fund 18 contribution. 19 Now, for us, if you look at that number, it 20 doesn't look like a lot, but for a small community 21 like us, that's a lot. 22 And, in fact, on another one of those sheets, 23 I asked our bookkeeper to put this together, the 24 increases over the last five years, from 2008 to 25 2009, went down once, and it hasn't looked back. 1 It started out at twenty-nine, went to 2 twenty-three, and this is thousands, but, again, 3 reminding you that we are a small community, and 4 it's just gone up. 5 That first year more than doubled, and then 6 the estimate for next year is over $101,000. 7 And, in fact, we were kind of betting that it 8 would be after last year; and it is. 9 Now, granted, that's an estimate, but usually 10 the bills come in pretty close to the estimate. 11 And, again, that's a hit for us. 12 And we're only allowed to exclude whatever 13 the cap is. Last year it was 2 percent. 14 So, we have to find out where we're going to 15 get the rest of it. 16 We have had to go into reserves. 17 Unlike Corning, we can't really reduce 18 people. 19 Again, being a small community, we have a 20 highway department of four people. 21 Now, I've had to ask for a little history 22 with the department. The fellows have told me -- 23 The one fellow that's been there about 24 20 years, he said, at one time, they had 10 to 25 12 people in the department. 1 Now they're down to four. 2 I mean, they do a great job. 3 In fact, we just renegotiated our contract 4 with their union, and even the union understood, 5 which was very nice. I mean, they made it easy. 6 We negotiated the contract in two sessions. 7 And, I don't know if that's a record, but, 8 again, for a small community, they understood our 9 position, understood what we're going through. 10 In fact, they are even willing to go along 11 with talking about health-care costs to, basically, 12 leave it open, as a -- to reopen it if we had to, 13 because they realize the cost challenges. 14 Something else that doesn't help with that, 15 speaking of health-care costs, it's my understanding 16 that, with Obamacare, the health care, it's required 17 to, I guess, extend health care to children up to 18 the age of 26. 19 Next year, from what I understand, it's going 20 to age 29. 21 However, New York State, it's 30. 22 And I couldn't believe that. 23 And I went to a meeting for the 24 Government Financial Officers Association, and my 25 bookkeeper, and a couple of other bookkeepers, 1 pointed that out to me. 2 And I just couldn't believe it. 3 I mean, it's -- all right, 26, all right, 4 fine, but now you're 28, or 29? 5 And New York State puts it at 30. 6 Why? 7 I mean, it's just -- you know, to me, to us, 8 it's mind-boggling. 9 And, again, with a small community like us, 10 you know, it hits. 11 So what we have done, to try and deal with 12 that, we have hired a consultant, who actually 13 doesn't really cost us anything, and he has agreed 14 to go out and help us better manage our health-care 15 costs, because we don't have specialists. We have 16 to hire outside people. 17 They're very good; we've sat down. 18 In fact, we're going to sit down with the 19 highway union and go over long-term health-care 20 costs, along with people in the town office, which 21 is another thing. 22 We have a town office of 10 people, but 23 that's representative of our area, of our county. 24 And size-wise, Ridgeway is the highest 25 town -- or, the largest town in Orleans County, by 1 square mileage. 2 And, we just -- we are doing everything we 3 can. 4 We just, as I say -- and we get, for lack of 5 a better term, dumped on with these things that we 6 hear every year, with tax cap, unfunded mandates. 7 We try to work with -- we try to work to grow 8 our business -- or, our economy with -- via Internet 9 broadband. 10 And then we -- it kind of gets stymied with 11 some of the State programs. 12 In fact, we had a conference call with 13 Senator Gillibrand's Office. 14 Somehow she heard what we were trying to do, 15 and two people from her office called and wanted to 16 know if they could help. 17 Well, myself; our county legislator, 18 Lynne Johnson; Dave Godfrey from Niagara County; and 19 the consultant, the engineer; all of us were on a 20 conference call with these two people, talking. 21 And, it's not like we're not trying, because 22 everything they advised us, or suggested we do, 23 we've already tried. 24 We explained to them: Well, we tried that, 25 it doesn't work. 1 In fact, at one point, the engineer asked me, 2 he said: Is there something else you tried? 3 And I went so far as to contact the 4 Walton Foundation, which is, Walmart, Sam's Club, 5 and that sort of thing, and they have a foundation 6 that will fund infrastructure projects. 7 Unfortunately, not this type. 8 So, again, we're being stymied. 9 You know, we're trying to grow our area, and 10 it's, just this is what we have, or this is what 11 we're working with. 12 Assessments, it's next on the list. 13 And this comes to me from our assessor. 14 We have an assessing department of one 15 person. 16 In fact, to try and share costs, she does 17 half of the village of Medina, along with the 18 assessor from the town south of us, Shelby. 19 The two of them work together, they do an 20 excellent job. 21 I had to say that or else Trish wouldn't be 22 happy when I got back. 23 But, anyway -- 24 Yes, and keep -- yes, keep the assessor 25 happy. It's like keeping the town clerk happy. 1 That's the first thing I learned: Don't tick 2 off the clerk. 3 But, anyway, what they're talking about here 4 is, and talking about fairness with assessments. 5 And, again, there's another sheet in there 6 which will show you that we have been certified as 7 being at 100 percent assessed value. 8 And they do this every three years. 9 What their frustration is, is that some 10 places in New York, from what we understand -- and 11 this comes from the [unintelligible] department and 12 from the State Assessors Association -- there are 13 some places in New York State that have not done a 14 reassessment in 40 years. 15 And, you know, we ask, why? 16 And I've checked, and asked them two or 17 three times, I said, "Is this true?" 18 And they said, "Yes, they're working on 19 1960s assessments." -- for whatever reason. 20 They're asking me: If the State's looking 21 for someplace for more money -- nothing against 22 it -- then maybe they should look there. 23 And so, again, we're doing what we're 24 supposed to do. We're trying to work with all these 25 things. 1 And, you know, as I say, we just get 2 frustrated. 3 And, next one down, I talk about, DEC, EPA, 4 regulations. 5 This is something that costs us money. 6 We understand, you know, the reasoning behind 7 them; however, sometimes it's to the point of being, 8 to be honest with you, ridiculous. 9 Perfect example: 10 Monday evening we had a board meeting. We 11 had two families come in, and they live on a State 12 road. They would like to fill in a ditch in front 13 of their house. 14 So they contacted a contractor, who told them 15 the work would cost approximately 16 five to six thousand dollars. 17 They said, start with the town, because 18 they're in this town and that is a State road. 19 They called their highway superintendent. 20 He came out, took a look, he said, All right, 21 I'll contact the DOT and see what we have to do. 22 They told them, All you have to do is get a 23 permit. 24 Okay, fine. 25 So he applied for the permit. Everything 1 went off. 2 Next thing we know, we received that letter, 3 that's in your packet, from the DOT, listing all of 4 those things that they require, which basically 5 means, we are required to hire an engineer, do a 6 hydrology study. They want sloping on the ground. 7 All kinds of things, for three homes. 8 And it's going to cost -- well, and they also 9 want us to take over responsibility for any 10 maintenance on this State road, and, put in a 11 $4 million liability policy, having it in place. 12 And, we're just looking at each other, 13 shaking our heads. 14 And as I say, all these folks want to do is 15 fill in a ditch. 16 So, so far, the people -- or, the homeowners 17 aren't sure where to go. 18 I told them that was on my list for today. 19 And, you know, we worked with them, to see 20 what we could do with the DOT. 21 And that's where we are. 22 But as I say, it may not sound like a lot, 23 you know, five or six thousand dollars, but you add 24 all these things up, in a small community, and it 25 adds up. 1 And then we have people coming to us, 2 complaining, you know: 3 Why do my children have to leave? Why do 4 they have to go to another state, or another part of 5 the country, to get a job? 6 Why can't you go to the local community? 7 You know, and I receive calls from people 8 asking me: Why don't we have Internet and broadband 9 access? 10 And getting back to that for a second, 11 because it's also being required more by the 12 State Education Department. They're requiring that 13 students do more online, including testing and 14 grading. 15 And, again, there are places that don't have 16 it. 17 And I've even spoke to -- I spoke to 18 homeowners. 19 And one lady tells me, she's had three major 20 suppliers out there: Verizon, HughesNet, and I think 21 Time Warner. 22 Time Warner will not run cable down her road 23 because they say it's too remote. 24 HughesNet, and -- HughesNet said they can't 25 get a signal. 1 So it's -- and she said, "My daughters are in 2 school, and they're telling me that, you know, they 3 have to do more on the Internet"; again, testing, 4 grading, and all that sort of thing. 5 Again, it may not seem like much, but it's a 6 small community, and it's indicative of the county. 7 In fact, we have what we call a 8 "Legislator Supervisor Group" that meets once a 9 month. 10 Senator Maziarz has been there a number of 11 times. 12 And, typically, when I go in, one or two of 13 them will nudge me and ask: Okay, how are we doing 14 on Internet? 15 From another economic standpoint, being a 16 rural community, one of our largest industries is 17 agriculture. 18 From what I understand, that's the second or 19 third largest industry in the state. 20 We have farmers -- first? 21 Oh, it is first, Pat? Okay. 22 All right, well, it moved up one. I thought 23 it was second or third. 24 Okay. 25 And we have farmers that don't have Internet 1 access, and they would like realtime prices for 2 crops. 3 They can't get it, you know, so they have to 4 wait, and, either buy a paper or call in somewhere 5 else, and -- for things like, you know, corn, 6 soybeans, you know, whatever. 7 We have an ethanol plant. You know, they'd 8 like to know what's the going price on corn. 9 I had the plant manager from the ethanol 10 plant call me one day and ask, when his road was 11 going to get Internet access, because sometimes he 12 works from home. 13 He doesn't have it. 14 I said, "Well, we're working on it." 15 I said, "That's the best I can tell you, 16 unfortunately." 17 So, I mean, these are little things that are 18 frustrating. 19 Going down the list here: tax reform. 20 You may have heard this. 21 I know New York, typically, is a leader in 22 different things, different ideas. 23 And, looked at this over time. Maybe it 24 sounds radical, my idea is, to throw out the tax law 25 and go to a flat tax in New York State. 1 That would really, you know, send a message, 2 and we would also be the leader. 3 Everybody pays something. 4 You're not -- you do away with all of the 5 credits, and the deductions, and, you know, all 6 these other things. Everybody pays something. 7 In fact, you may have even seen this, where 8 they say you can file your income tax on a postcard. 9 Okay, fine. 10 I know it started in Pennsylvania a long time 11 ago. I don't know if they got away from it. 12 But, anyway, just some kind of reform here, 13 because, again, and I'm sure you've heard it. 14 In fact, Shelby, south of us, has been told 15 they have the highest property tax, I believe it's 16 either Western New York or the state. 17 And now they -- and there's really nothing 18 they can do. 19 I mean, we have unfunded mandates. We have 20 all kinds of things that, you know, we're trying to 21 work with, but it's frustrating. 22 And, next -- and this is something else that 23 will keep -- does affect our economy, and that's the 24 SAFE Act. 25 The State passed the SAFE Act. 1 And one of the forms of revenue for us has to 2 do with licenses: hunting licenses, fishing 3 licenses, that sort of thing. 4 It's a form of recreation which affects our 5 economies. 6 People come into the area and they hunt. 7 They stay at local motels, eat in restaurants, buy 8 gas, buy groceries, that sort of thing. 9 Helps the sales tax. 10 And I talked to our clerk -- both clerks 11 yesterday, and hunting licenses are down, and 12 they're not sure why. 13 And, in fact, I think it started -- the 14 season opened on Monday, so you could buy it -- 15 well, you could buy your -- start buying your 16 licenses on Monday. 17 And they said, "We don't know why." 18 And our guess is, it's things like the 19 SAFE Act. 20 They look at it, and they say: You know, I'm 21 not going to do this. Forget it. I'll go someplace 22 else where it's more -- it's easier and 23 understandable. 24 And, lastly, and this also has to do with 25 farming, and, our number one industry. 1 And this was asked to me by one of our board 2 members, who is a farmer. 3 The Highway Trust Fund, money goes in there 4 for poles and roads. 5 And, I mean -- 6 Senator, please, you know, correct me if I'm 7 wrong. 8 -- and every year, for whatever reason, when 9 you start working on the budget, money gets 10 transferred somewhere else. 11 Please leave it in there. 12 The reason is, the Erie Canal goes through 13 Ridgeway and Orleans County. We have some very old 14 bridges. 15 In fact, I was talking to a fellow that owns 16 a construction company, and he said: Some of the 17 bridges, you're looking at 100-year-old bridges, 18 technology that was back in the 1930s. 19 And the thing is, our farmers are big, and a 20 lot of them own property on both sides of the canal. 21 They can't go from one side of the canal 22 easily. 23 In fact, what ends up happening with a lot of 24 the equipment, they end up going through the village 25 of Medina, and over two main bridges. One is in 1 Albion, one is in Medina; the lift bridges. 2 Again, it sounds like a small thing, but 3 it's -- you know, they're trying to do -- be as 4 efficient as possible, and, this is what they're up 5 against. 6 And the bridges we do have, they're either 7 limiting the weight, or they're limiting -- 8 actually, they're limiting access. They're putting 9 up cones, and so only a car can go through it, a 10 small car. 11 And, again, it's something that we've -- you 12 know, we've had to try and deal with. 13 And, they have asked me to come out and say 14 something. 15 So if there's any diverting, please, leave it 16 there so we can do something with these bridges. 17 And I'm not sure how many years ago, this may 18 go back, all the way to Governor Pataki, but the 19 State came through and they started taking down 20 bridges. Some of the older bridges. 21 In fact, I know for a fact, they took down 22 one, because we live on that road. We can't get 23 over the canal on our road anymore. We have to go 24 west, and go over the next bridge. 25 They took it down, for whatever reason, and 1 now there's even less access. 2 I've been hearing this from -- and as I say, 3 if farmers come to us and ask, you know, Why? and -- 4 Why don't they fix these things? 5 So these -- this is my short list. 6 My long list, as I say, you can -- please 7 feel free to, you know, review it. 8 I've got a question -- or, I've got reasons 9 in there. 10 I've also got -- I don't know if it was the 11 correct thing to do, but I included my card. It has 12 my personal e-mail address. 13 If you have any questions, you're more than 14 welcome to contact me, with a phone -- with the 15 phone number. 16 And now I'd be happy to answer any questions. 17 SENATOR MARTINS: Supervisor, thank you. 18 BRIAN NAPOLI: You're welcome. 19 SENATOR MARTINS: You may rue the day you 20 gave us your private e-mail address, though. 21 BRIAN NAPOLI: That's funny. 22 Well, it's funny, I have one of those little 23 cardholders on the counter in the town office. 24 And, every day, it's there. 25 And I said, "I put my cards in there." 1 And the clerk warned me, and said the same 2 thing. 3 She goes, "You know, you may not want to do 4 that." 5 And I said -- I -- "Just make sure it's 6 full." 7 And I've been with the town nine years now, 8 and I haven't really had anybody call. 9 SENATOR MARTINS: It's worked out okay. 10 BRIAN NAPOLI: Well, I keep thinking, I'm 11 either doing something right, or people are so 12 disgusted with me that they just don't want to talk. 13 So, all right, well, one or the other. 14 So I just, you know... 15 SENATOR MARTINS: We'll assume it's the 16 former. 17 I know Senator Maziarz has some questions. 18 Senator. 19 SENATOR MAZIARZ: Well, first of all, thank 20 you very much, Supervisor Napoli. 21 I appreciate you taking the time to come up 22 here today. 23 I know you've been very vocal, and many of 24 these issues, you and I have had many conversations, 25 along with our colleague in the State Legislature, 1 Assemblyman Steve Hawley, who has been very active 2 in Orleans County. 3 And I just, for the sake of my colleagues, I 4 don't have a question, but I do want to state the 5 importance of what you brought up about the Internet 6 and broadband access. 7 And just for the sake of the recording here, 8 I don't think there's a local government official in 9 a rural or small town area anywhere in 10 New York State that has done more than you have to 11 bring this issue to the forefront. 12 You know, Assemblyman Hawley and myself have 13 sponsored many hearings, meetings, with you, with 14 your consultant, with multiple counties, and we do 15 this in a multiple-county fashion. 16 And I think that we are making some headway 17 on the broadband Internet access. 18 You know, we have actually brought the 19 private companies, Verizon, Time Warner, AT&T, to 20 the table, because they have a certain degree of 21 responsibility in this too. 22 I mean, they want government to do all of the 23 expensive hard work, and then they will reap the 24 profits. And that's unacceptable. 25 And you've been very understanding in that 1 way. 2 The second point I just wanted to make for my 3 colleagues, about the lock-box and the 4 transportation aid. 5 We have, on the Senate side, and I know the 6 Chairman knows this very well, have passed 7 legislation which would prevent any raid of 8 transportation funds. 9 Unfortunately, in the other House, they have 10 rejected that every year since, 2007-2008, I know 11 that. 12 But the good news is -- that's the bad news. 13 The good news is, is that we have increased 14 in Region 5, due to the efforts of the Chairman of 15 the Senate Transportation Committee, 16 Senator Fuschillo from downstate, and 17 Senator Grisanti and Senator Gallivan and 18 Senator Ranzenhofer and myself, have increased the 19 State allotment to Region 5. 20 Now, that always doesn't affect the canal 21 bridges, because that's more the Thruway Authority 22 than it is the DOT. 23 But I do want to tell you, Brian -- 24 And you'll be getting a letter from me and 25 Steve Hawley, shortly, about this. 1 -- we've scheduled a meeting with 2 Brian Stratton, the director of the 3 Canal Corporation. 4 You know, the canal, for my colleagues who 5 don't represent the area of the Erie Canal, it is a 6 quandary. 7 You've got the fixed bridges -- the 8 "high bridges," as they refer to them as -- and then 9 the lift bridges. 10 And I'm sure it's the topography of the 11 state, but the lift bridges, I think there's 12 twenty-two of them along the canal, eighteen of them 13 are west of Rochester, which makes them all almost 14 in my Senate District, between Rochester and 15 Niagara -- and North Tonawanda, actually. 16 But, the lift bridges are very expensive, to 17 maintain, to repair, to operate. 18 We did one in the city of Lockport back in 19 the late '90s. It was $7 million. 20 And, it is in a state of disrepair already. 21 But, we have focused a lot on the 22 Knowlesville Bridge in Orleans County, because that 23 one is more centrally located and used by a lot of 24 farmers. 25 So, we've scheduled a meeting with 1 Director Napoli, with the local officials in 2 Orleans County, because it's clear that we have to 3 do something. 4 And, also, I should have mentioned 5 Tom Madison, the CEO of the Thruway Authority, who's 6 been as cooperative as he possibly can be. 7 But, it's going to take a lot of dollars. 8 But Governor Cuomo, I think it was -- was 9 sort of a little bit of a positive with the break in 10 the wall at Albion last year, when Governor Cuomo 11 actually came out to see the effect that it had. 12 And I think he was sort of surprised. 13 You know, the canal tends to be more, out of 14 sight, out of mind, for people who represent and 15 live in Downstate New York. 16 And he was surprised at what the effect that 17 break had on the canal, and how important the canal 18 was to the agricultural community, to the 19 recreational community. 20 And I'm not talking about just boating 21 recreation. 22 It's also golf courses, irrigation, that do 23 things off of it. 24 It's a real integral part of the economy. 25 And you in a small town, you know, and in a 1 relatively rural suburban community like Orleans 2 County, know it very well. 3 So, the Governor, I think, got a little 4 wake-up call, too, which is a positive. 5 So, thanks, Brian, not just for being here 6 today, but for the work that you do all yearlong. 7 I appreciate it. 8 Mr. Chairman, thank you. 9 SENATOR MARTINS: Thank you very much. 10 Mr. Supervisor, thank you. 11 You gave us a lot of material here. I know 12 we have some homework to do. 13 But, I do appreciate your perspective, and 14 your testimony here this afternoon. 15 Thank you. 16 BRIAN NAPOLI: You're welcome, Senator. 17 Senators, thank you very much. 18 SENATOR MARTINS: Our next witness is the 19 supervisor of the town of Lancaster, Dino Fudoli. 20 Good afternoon, Supervisor. 21 How are you? 22 DINO FUDOLI: All right. 23 I'll be brief, which is not one of my strong 24 points, as Senator Gallivan knows, being brief, but 25 I will be so. 1 Today, I really would like to just talk about 2 some pension reforms. 3 I know this past year, or the past two years, 4 I believe, there was a -- a Tier 6 was created. 5 And I guess I look at something like this as 6 a supervisor. 7 I've only been a supervisor for two years. 8 I was a legislator prior to this. I was a 9 county legislator for two years. 10 And I know, and as a county legislator, our 11 budget was mandated. 12 Almost 90 percent of it was mandated by 13 New York State, so we were kind of bound by a lot of 14 the mandates and a lot of the things that 15 New York State pushes us into. 16 So as we're sitting here today, talking about 17 municipal bankruptcy or financially distressed 18 communities, what we can't -- what I can't help but 19 look at, is that everything seems to be Band-Aids, I 20 guess, on festering sores. 21 In other words, there's nothing -- there's no 22 real solid thing. They're all feel-good things that 23 the governor proposes, or that the Senate or the 24 Legislature passes. 25 And, again, I'll go back to Tier 6, for 1 example. 2 In my town of Lancaster, we have about 3 41,000 residents. We've got about 250 employees. 4 Our budget is -- our annual budget is about 5 $30 million, and of that budget, about 10 million of 6 it is police and fire. 7 And, for example, Tier 6, of our total 8 payroll -- say, for outside of the police and fire, 9 our total payroll is about $5 million. 10 4 million of that 5 million -- actually, 11 4,800,000, almost 5 million, of the 5,367,000 is 12 strictly in Tier 3 and Tier 4. 13 Only $100,000 -- roughly, $109,000 of the 14 entire $5.3 million is Tier 6. 15 Tier 4, for a lot of these employees, 16 I think, I believe went up to 2009. 17 So, literally, we're talking about, if 18 somebody was hired anywhere between 2005 and 2009, 19 these people could be on our payroll for, roughly, 20 20 to 25 more years. 21 Most people don't do their 20-years-and-out 22 these days, only because, the age of peoples, 23 they're working later, they're working longer. 24 And, ultimately, I don't see the Tier 6 as 25 something that helps. 1 You know, me, I'm the 46th supervisor. 2 It may help the 55th or 56th supervisor 3 of Lancaster, we'll get to that point. 4 But what we would like to see is that there's 5 some more immediate pension relief. Stuff that has 6 real teeth to it, something that can give us some 7 kind of relief. 8 I know there's not much we can do about the 9 Tier 4 and the Tier 5, and Tier 2s. And we have a 10 couple of Tier 1 employees, still, that lingering 11 around as well. 12 But what we would like to see is maybe, 13 something, a move towards a defined benefits -- or, 14 a defined contribution plan, as opposed to a defined 15 benefits plan. 16 The private sector seemed to move into those 17 years ago. 18 The government sector seems to be the final 19 portion of the economy that doesn't seem to 20 understand the need to move out of a defined 21 benefits and into a defined contribution plan. 22 I know there is a component of that in 23 Tier 6, but it seems like we need to take it a step 24 further, and, literally, you know, start eliminating 25 the pension system as we know it, in order for us to 1 see real reforms. 2 With that said, I don't have a whole lot more 3 to add to that. 4 I think that's really my biggest -- my 5 biggest complaint, is that a bulk -- that the Tier 6 6 was created, and we ultimately believe it's a step 7 in the right direction, but, unfortunately, it will 8 help people, 15, 20, 25 years down the road from 9 now, but it's not going to do much for us to 10 relieve -- for relief now, in other words. 11 So, as you can see, as I said, a bulk, you 12 know, 80 to 90 percent of my payroll are still 13 Tier 2, Tier 3, and Tier 4 employees. 14 Tier 6 is, literally, less than 2 percent, or 15 whatever it is. I can't remember it off the top of 16 my head, the percentage. 17 So, ultimately, we'd like to see some kind of 18 relief, some mandate relief and some pension relief, 19 that has real, you know, teeth to it. 20 SENATOR MARTINS: No, I couldn't agree with 21 you more. 22 Certainly, I understand that. 23 You're familiar with the constitutional 24 constraints that we have with regard to affecting 25 Tiers 2, 3, 4 -- 1 DINO FUDOLI: Correct. 2 SENATOR MARTINS: -- and 5. 3 Therefore, there was a Tier 6. 4 DINO FUDOLI: Sure. 5 SENATOR MARTINS: Tier 6 is a -- I think a 6 positive departure from the previous tiers in a way 7 that it allows for greater contribution. 8 There's a scaling in there. 9 And, certainly, it's going to provide relief. 10 But I agree with you, it's down the road. 11 It's nothing immediate. 12 Certainly, it's not going to provide you with 13 any relief in the short term. 14 DINO FUDOLI: Right. 15 SENATOR MARTINS: Did you have a chance to 16 take a look at the pension-leveling piece of this 17 year's budget? 18 DINO FUDOLI: I did look at it briefly. 19 I don't know it inside and out. 20 I certainly know that it does -- it almost 21 seems like it's something that locks you in for a 22 longer period of time. And it almost seems like 23 it's just pushing the problem, or pushing the can, 24 maybe down the road. 25 I'm not sure it will actually do a lot of 1 good, in other words. 2 SENATOR MARTINS: Well, the thought behind 3 it, and -- was sort of to address your concern that 4 you raised right now. 5 Since Tier 6 isn't going to come in, 6 literally, for years -- 7 DINO FUDOLI: Right. 8 SENATOR MARTINS: -- maybe, even -- and in 9 some instances, where we're dealing with a younger, 10 smaller workforce, it may not happen for decades, 11 how do we bridge that gap, especially in a time when 12 we are going through a spike in pension costs? 13 10 years from now, the pension costs in 14 New York State for ERS were zero. 15 DINO FUDOLI: Right. 16 SENATOR MARTINS: Right? 17 DINO FUDOLI: And in my term alone -- 18 SENATOR MARTINS: Now they're approaching 19 21 percent. 20 And that doesn't include police and fire, 21 which was your other point, which is at around 22 28 percent or 29 percent. 23 DINO FUDOLI: Yes. 24 SENATOR MARTINS: So, how do we provide 25 short-term relief? 1 And the idea in the budget this year was, we 2 need to flatten that out. 3 And, so that's where that was. 4 DINO FUDOLI: Right. 5 SENATOR MARTINS: Because, as you flatten out 6 your pension costs over time, if you're able to, 7 over time, again, introduce Tier 6 employees, 8 eventually, it begins to level off and reduce. 9 There is no magic bullet. 10 Even if we were to do something as what 11 people would consider to be as radical as a defined 12 contribution plan -- and I understand the private 13 sector is there -- how do we provide that relief 14 now? 15 That's why we offered that as part of the 16 budget. 17 DINO FUDOLI: Right. 18 Does that not, though, aren't we also going 19 to be heading into a declining pension market, 20 because of the way that the stock market has 21 performed over the last three or four years? 22 SENATOR MARTINS: Yes. 23 DINO FUDOLI: Because of the smoothing, 24 aren't we kind of at the tail end of that right now? 25 So wouldn't it be kind of a foolish step for 1 us to take advantage of that, the smoothing program 2 that was to offer with Tier 6, at this point in time 3 we, where might see maybe one more up-year in the 4 pension contributions, and then we might start to 5 see a decline? 6 Isn't that kind of premature to jump into 7 something like that? 8 Are we not locked into that for a long time? 9 SENATOR MARTINS: You're locked into it 10 forever. 11 DINO FUDOLI: Right. 12 SENATOR MARTINS: And, yes, you're locked 13 into it for a very long period of time. 14 DINO FUDOLI: Yes. 15 SENATOR MARTINS: The -- I happen to be a 16 person who agrees with you, by the way, that thinks 17 that those costs are going to come down 18 significantly over the next few years. 19 The question is: Is it going to be another 20 two years, or three years, before those costs come 21 down? 22 There are people who have told me they think 23 it's going to be even longer than that. 24 DINO FUDOLI: Okay. 25 SENATOR MARTINS: So -- and for most 1 municipalities, if it's going from 18 percent to 2 21 percent, and then, potentially, going up from 3 there again, at what point are you willing to 4 continue to absorb those costs and tighten your 5 belt, or go into your reserve funds, before you 6 start seeing those savings? 7 It was meant as a bridge to be able to get 8 you to that point. 9 DINO FUDOLI: Sure. 10 SENATOR MARTINS: But, I think you hit it 11 right on the head: There is relief on the way. It 12 is a few years out, when it comes to pensions. 13 And, hopefully, that will provide a little 14 bit of relief as we tackle the longer-term problems, 15 which is, you know, a pension system that, frankly, 16 I think we can all agree, has become very expensive 17 for our local government. 18 DINO FUDOLI: Okay. 19 One more thing, before -- I'm just going to 20 close on this: 21 What about some relief from the Taylor law? 22 Any -- is there any talks of that in Albany 23 at all, about changing that, or giving some kind 24 of -- I mean, it almost seems like there's no 25 incentive for the unions to step up to the plate and 1 negotiate. 2 I mean, if I knew I had -- I couldn't lose 3 anything, I mean, really, we're at a point right 4 now, where we have employees in police without a 5 contract for about two years, going on three years 6 now. 7 And, it seems like there's really no -- 8 there's no encouragement on their side to step up, 9 because they still get everything, or they retain 10 everything they have. 11 So there's really no incentive, I guess, so 12 to speak, for them to step up to the plate and 13 negotiate in good faith. 14 SENATOR MARTINS: Sure. And I think, you 15 know, it has been part of the discussion. 16 Certainly, it's been part of the discussion 17 in the three years I have been in the Senate. 18 It was part of the discussion for the 19 eight years that I was a mayor of the village of 20 Mineola down in Nassau County, prior to that. 21 The idea, and the difference, and I'm sure 22 you'd agree as a supervisor, of being an executive, 23 and then coming to the Legislature, is building 24 consensus around different ideas. 25 There have been discussions. 1 There hasn't been consensus; and, so, people 2 are still working on it. 3 DINO FUDOLI: Okay. 4 SENATOR MARTINS: The idea of what form 5 should that take; whether or not there should be 6 reform to the Triborough Amendment, whether or not 7 there should be reform to the level of eliminating 8 steps in the off-years beyond the 9 collective-bargaining agreement, to provide some 10 parity, so that you do have an incentive for both 11 sides to negotiate a new collective-bargaining 12 agreement, and not just during tough economic times 13 like now, allow for multiple years to go by and 14 still continue to collect your steps. 15 It is being discussed, I can assure you of 16 that. 17 DINO FUDOLI: Okay. 18 SENATOR MARTINS: Senator Gallivan? 19 SENATOR GALLIVAN: No. 20 DINO FUDOLI: Okay. Thank you very much. 21 SENATOR MARTINS: Thank you. 22 And our last witness for this afternoon, we 23 have the executive director of the 24 Wellness Institute of Greater Buffalo and 25 Western New York, Phillip Haberstro. 1 PHILLIP HABERSTRO: Senator, I would like 2 [inaudible], to get a little blood flowing through 3 the veins. 4 SENATOR MARTINS: It would be a 5 wellness-directed thing? Is that it? 6 PHILLIP HABERSTRO: Something along those 7 lines. 8 SENATOR MARTINS: Thank you for joining us 9 today. 10 I appreciate it. 11 PHILLIP HABERSTRO: My pleasure for being 12 here. 13 And thank you for holding the hearing. 14 And welcome to Western New York. 15 SENATOR MARTINS: Thank you. 16 PHILLIP HABERSTRO: It's great to have you 17 here. 18 And Patrick, and Mark, it's great to see you 19 both here today. 20 I too will be brief today. It's pretty 21 simple for me to state the case that I am going to 22 make to you today. 23 As you listened to, and I did, all of the 24 good people that came here and spoke to you, it was 25 very clear to me that nobody really spoke to the 1 issue of, in this discussion, around 2 health-insurance costs, the health of the employees. 3 And that's what I'm putting in front of the 4 three of you today, and Senator Maziarz also. 5 We can do something about that. 6 The evidence is very clear that healthier 7 employees are more productive employees, and make 8 less unnecessary use of the sickness-care system. 9 So as you look at a long-term solution to 10 this issue, which all of your speakers addressed, we 11 have the evidence, and we have the capacity to do 12 that. 13 Simply I would say to the three of you, give 14 us an opportunity to work with you or your offices, 15 and we will help you to produce and improve employee 16 health in the municipalities across the state of 17 New York. 18 We have in the health departments some fine 19 resources, but of and by themselves, it's not enough 20 to get the job done. 21 It really takes, particularly at the local 22 level, the supervisor, the mayor, and et cetera, to 23 be part of the solution; they need to be part of the 24 team that we do this kind of work with. 25 So, I would just simply say to you, that as 1 you look at both the short term and the long term of 2 solving these issues of challenges that our 3 municipalities, and it was mentioned today, our 4 public-school systems, any public-sector employer 5 faces, employee health-promotion programs absolutely 6 have to be part of the solution. 7 Without those there, you're going to be on a 8 treadmill, you're going to continue to see 9 escalating health-care costs. 10 Patrick and Mark, I think you may be aware of 11 this, but -- and, John, I don't know exactly, in 12 your district, and your -- and that, but, 13 Erie County is the 56th least healthy county in 14 the state of New York, according to the 15 Robert Wood Johnson Foundation. 16 And, Mark, Niagara County is 59th. 17 So, often you will hear in our county about 18 the high levels of numbers of people that we have 19 insured, which is good. 20 And then we also have the low cost for our 21 sickness-care services, but, economically, we cannot 22 take advantage of that if our people aren't healthy. 23 And workplace health promotions bridge into 24 retirees, they bridge into families with children. 25 I'm sure the three of you are very conscious 1 of the obesity crisis that we have with our 2 children; and, so, families that have good health 3 practices, that will be an influence on the 4 children. 5 At the same time, we have hard research on 6 what is called "the compression of morbidity"; and 7 that's how much sickness you have at the end of 8 life. 9 Healthier people have less sickness; 10 therefore, less cost. 11 So, I will stop there, and thank you for the 12 time today. 13 And if I can answer any questions, then we 14 would certainly be available, as a nonprofit, to any 15 of your offices, to help address this issue in your 16 particular interests. 17 SENATOR MARTINS: And with the concept being, 18 that as we encourage a healthier community and 19 healthier workforce, there will be residual benefits 20 in the form of lower health-care costs as insurers 21 reap the benefits of a healthier community as well? 22 PHILLIP HABERSTRO: Yes. 23 And, Senator, I would want to be a little 24 specific in that. 25 We're really talking about reducing 1 unnecessary spending for chronic diseases. 2 That, today, compromises about 75 percent of 3 where your spending comes from. 4 SENATOR MARTINS: Right. 5 PHILLIP HABERSTRO: I wouldn't want to 6 overpromise, but I will tell you on the other side 7 of the ledger, that productivity improvements, and 8 the core of every municipality across the state of 9 New York, is its people. 10 Patrick, you have a clear understanding of 11 what stress can do to police officers. 12 Every community in -- just about, in our 13 great state has police officers. 14 And, so, be it police officers, firefighters; 15 [unintelligible] the streets and sanitations are the 16 public-works people that are out there, there are 17 things we can do today. 18 I'm not talking five years from now. 19 I'm talking, you give me a shot with either 20 of you guys here in Western New York, or even down 21 in your community, we can get things going, we can 22 make things happen. 23 We have town and county and city and village 24 associations. 25 With your support, we can go and talk to 1 them. We can show them resources that are available 2 tomorrow in their communities that will affect the 3 health. 4 I'm not here asking for more money. You guys 5 get asked enough for that kind of thing. 6 All we're saying is, give us an opportunity, 7 those of us in the field of that are health 8 promotion, to help our local communities, and the 9 State of New York. 10 This is a win-win-win: Win for the 11 taxpayers, win for the employees, and win for the 12 employers. 13 And, you know, I would say to you, without 14 any doubt in my mind, unequivocally, it's an 15 opportunity that we have not fully embraced and 16 taken advantage of. 17 SENATOR MARTINS: Thank you. 18 Any questions? 19 SENATOR GRISANTI: Thanks. 20 Well, I agree with, you know, the 21 [unintelligible] that I just saw briefly, I agree 22 with that, because there is a correlation. 23 [Unintelligible] health costs, you know, for 24 municipalities, that's a big factor. 25 The private sector, they're doing it, the 1 wellness programs. 2 PHILLIP HABERSTRO: Yes. 3 SENATOR GRISANTI: You know, the different 4 lunches, [unintelligible], you know, in the 5 buildings now that they're now building. 6 So, there are -- there is a correlation. 7 And I look forward to your efforts, and your 8 help. 9 PHILLIP HABERSTRO: Yeah. I -- you know, and 10 I'd just leave one final thought for you, because it 11 has a lot to do with the three of you in the state 12 of New York. 13 In 1964, when I was a young buck at 14 Cardinal O'Hara High School, the surgeon general's 15 report on tobacco and health was released. 16 And at that time in America, one in two 17 adults was smoking. 18 If you fast-forward to 2013, in 19 New York State, we're down to under one in five, and 20 we're still working to bring that down. 21 But that's lives saved, and significant 22 cost-savings. 23 And if you ask, "How did we get there?" 24 I would submit to you that part of that answer, an 25 important of part of that, was public policy. 1 And, again, using carrots, incentives, 2 through control boards, and other things that you 3 have impact on, are ways to get that done. 4 It's public policy; 5 It's environmental supports; 6 It's building capacity in communities to do 7 these kind of things; 8 As well as the use of evidence-based 9 programs. 10 But maybe most importantly, because this, I 11 think, Senator Martins, reflects what you're here 12 for today, you are taking a proactive approach so 13 that we don't find our municipalities in the 14 situations that [unintelligible]. 15 We need to have that same mindset about 16 managing and taking care of health costs. 17 SENATOR MARTINS: Thank you. 18 SENATOR GRISANTI: Thank you. 19 SENATOR MARTINS: Thank you very much. 20 PHILLIP HABERSTRO: Thank you, gentlemen. 21 SENATOR MARTINS: Well, I want to thank 22 Senator Gallivan and Senator Grisanti for having 23 joined us. 24 Certainly, Senator Maziarz, for having joined 25 us as well. 1 This was very insightful. It certainly gives 2 us some food for thought. 3 At the end of the three sessions that we'll 4 be holding, we'll be preparing a report, and some 5 thoughts, and we'll be incorporating a lot of the 6 ideas and some of the suggestions that we received 7 today. 8 So, thank you to the Greater Buffalo 9 Community. I certainly thank you from my 10 colleagues; 11 And certainly to our witnesses, for having 12 testified and participated in this discussion today. 13 Have a great day. 14 SENATOR GRISANTI: Thank you. 15 (Whereupon, at approximately 1:38 p.m., 16 the public hearing held before the New York State 17 Senate Standing Committee on Local Government 18 concluded, and adjourned.) 19 20 ---oOo--- 21 22 23 24 25