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Wall Street Downgrades Buffalo's Bond Rating

Buffalo, NY – (AP)--The city's credit rating dropped to one level above junk bond status as state lawmakers remained deadlocked over the makeup of the financial control board that will take over and try to balance the city's books.

Mayor Anthony Masiello and city Comptroller Andrew SanFilippo warned that if Gov. George Pataki and the Legislature fail to reach agreement on the board by Thursday's expected end to the Legislative session, the city would sink into deeper trouble.

"We'll have havoc here in the City of Buffalo if we don't have a control board," Masiello told The Buffalo News. "Then I have no other recourse but to lay off hundreds of police and fire department workers to structurally balance this budget. And I will do that first thing Friday morning."

City officials were told Wednesday that Moody's downgraded the credit rating to Baa3 and that Standard & Poor's downgraded the rating from BBB to BBB-. Both ratings are one step above non-investment grade bonds. The city is on both of the agencies' credit watch lists.

"The good news is we're still investment grade," SanFilippo said. He warned though that without a control board in place, further downgrades were possible.

The control board would be authorized to approve $24 million in short-term borrowing so the city could balance its budget for 2003-04, the comptroller said.

He said the city and school district owe millions of dollars in unpaid bills that they hope to cover by July and warned that payroll expenses may not be covered after this week.

Although lawmakers Monday agreed to give Pataki a majority of appointments to the board, negotiators were still at odds Wednesday over the exact composition of the board and the extent of its powers.

"I want to make sure we have a strong board and a strong bill with real power," Pataki said Wednesday after meeting with legislative leaders on a host of issues.

Neither Pataki nor Assembly Speaker Sheldon Silver would discuss specifics.

State Comptroller Alan Hevesi last month recommended the city's finances be taken over by a state panel after a review by his office determined the city's budget deficit could balloon to $127 million by 2007.

(Copyright 2003 by The Associated Press. All Rights Reserved.)