Buffalo and the Rust Belt

1. Buffalo and the Rust Belt PSC 312: Urban PolicyDr. Joseph StefkoUniversity at Buffalo, SUNYFall 2007

2. A Historical Sketch • Once a large, vibrant city • One of the largest in the U.S. • Thriving economy based on location • Competitive edge waned • City began to contract • Economic, demographic stagnation • Now, severe financial challenges

3. Buffalo’s Rise • In the mid-1800s, Buffalo was one of the most influential cities in the U.S. • Buffalo’s early competitive advantages • Large population • Beginning of significant growth • Location

4. An Economy Built on Water • Canal and lake shipping • Among nation’s largest port cities • Catalyst for economic growth

8. Buffalo Harbor • Incredible shipping activity yields growth and innovation • Automated grain elevator • Expansion of Buffalo Harbor (1847) • Passenger traffic begins to grow, in addition to goods

10. Other Factors in the 1840s • First major university (UB) • First railroad • Massive influx of immigrants • Vibrancy continues through century

11. The Nation’s Largest Cities 1900 NYC Chicago Philadelphia St. Louis Boston Baltimore Cleveland (#8) Buffalo San Francisco Cincinnati 1910 NYC Chicago Philadelphia St. Louis Boston Cleveland Baltimore Pittsburgh Detroit (#10) Buffalo 1920 NYC Chicago Philadelphia Detroit Cleveland St. Louis Boston Baltimore Pittsburgh Los Angeles (#11) Buffalo 1930 NYC Chicago Philadelphia Detroit Los Angeles Cleveland St. Louis Baltimore Boston Pittsburgh (#13) Buffalo

12. The Nation’s Largest Cities 1940 NYC Chicago Philadelphia Detroit Los Angeles Cleveland Baltimore St. Louis Boston Pittsburgh (#14) Buffalo 1960 NYC Chicago Los Angeles Philadelphia Detroit Baltimore Houston Cleveland Washington DC St. Louis (#20) Buffalo 1970 NYC Chicago Los Angeles Philadelphia Detroit Houston Baltimore Dallas Washington DC Cleveland (#28) Buffalo 1950 NYC Chicago Philadelphia Los Angeles Detroit Baltimore Cleveland St. Louis Washington DC Boston (#15) Buffalo

13. The Nation’s Largest Cities 1980 NYC Chicago Los Angeles Philadelphia Houston Detroit Dallas San Diego Phoenix Baltimore (#39) Buffalo 1990 NYC Los Angeles Chicago Houston Philadelphia San Diego Detroit Dallas Phoenix San Antonio (#50) Buffalo 2000 NYC Los Angeles Chicago Houston Philadelphia Phoenix San Diego Dallas San Antonio Detroit (#58) Buffalo 2005 NYC Los Angeles Chicago Houston Philadelphia Phoenix San Antonio San Diego Dallas San Jose (#66) Buffalo

14. Population Trend

15. Buffalo’s Economic History • Built on manufacturing • “Production economy” • Grain distribution • Aircraft (1920s) • Automobile (1900-20s) • Power • Lumber • Chemical Industry (1920s ) • Steel

16. Bethlehem Steel • Acquires Lackawanna Steel in 1922 • By 1940s, is world’s largest • Employs 20,000 through 1960s • Reduction begins in 1970s • Steel-making ended in 1982 • Plant closes in 1983

17. Changing Economic Character • Competitive advantages wane • Immigration slows/stops • Filling in of Erie Canal • Role of outside interests • Great Depression • Delay in New Deal • “Founding industries” collapsing

18. Changing Economic Character • Dependence grows • Diversification declines • Founding industries gone by 1950s • St. Lawrence Seaway (1960s)* • Growth of Buffalo’s suburbs • UB North Campus • Bethlehem Steel closes

19. Buffalo’s Economy Today Largest Employers: State Government Federal Government Tops Markets Erie County Government Buffalo City School District UB Kaleida Health M&T Bank HSBC Bank USA Catholic Health System

20. The Economic Toll • Lack of economic growth • Rapidly declining population base • Poverty concentrations • Decaying tax base • High unemployment rates • Suburbanization of wealth

21. Buffalo’s Control Board • Buffalo Fiscal Stability Authority Act(signed into law July 3, 2003) • Other control board examples • Washington DC (1997) • NYC (1975) • Yonkers (1975) • Pittsburgh (2004) • Philadelphia (1991) • Nassau County (2000) • Erie County (2005)

22. Historical Context of Control Board • Decades of decline • Ability to grow revenues weakens • Elastic revenues, defined • State aid increases in late 1990s • Post-2001 impact • State Legislature requests OSC review

23. State Comptroller’s Report • Long-term economic weakness • Population decline • Structural budget deficit • Growth in budget gaps

24. A Look at Buffalo’s Budget • $300 million • Major revenues are NYS, Sales Tax and Property Tax • Vast majority is employee-related cost • Health insurance, pensions driving costs • 2,500 employees in City government

25. State Comptroller’s Report (continued) • Projected growth in budget gaps (up to $50 million in 2004 if problems weren’t addressed) • First to recommend a control board: Buffalo Oversight and Recovery Board • Legislature takes findings, negotiates bill w/ Governor creating Board

26. The Control Board • 9 members (5 by Governor, 1 by State Legislature, 1 by OSC, Mayor and CE) • Chair, Vice Chair appointed by Governor • Diverse board: Public, private and non-profit sectors; Community leaders; Experts in their fields

27. Control Board Powers • Four-Year Financial Plan • Approval/Rejection of Budget • Ensure budget balance • Close budget gaps • Can impose budget plan if necessary • Can freeze wages if necessary • Can impose hiring freeze if necessary • Can borrow on behalf of City

28. How the Financial Plan Works • How the City must close its budget gaps • 30% in 2004 • 45% in 2005 • 60% in 2006 • 80% in 2007 • 100% in 2008 and thereafter

29. How the Financial Plan Works • New actions with recurring value • Narrow (and eventually close) structural budget gap • Deficit borrowing • “Easing” the City’s way to budget balance • Avoiding draconian budget/service cuts

30. What’s Next for Buffalo? • Accomplishments w/ the Control Board • How long is the Control Board in place? • A challenging agenda • A new Mayor • What should the focus be? • What are Buffalo’s assets? Liabilities?