On July 14, 1976, this small upstate New York community (pop. 82,000) was on the brink of financial ruin, 48 hours from bankruptcy with a debt in the neighborhood of $5.8 million - almost one-fourth of its entire budget.
In fact, for seven straight years, the city had run deficit budgets of from $500,000 to $1 million a year.
To make matters worse, the city's offering of a $20.1 million note to the New York City financial community the week before was met with what might be considered something less than enthusiasm: There wasn't one sigle taker.
Of course, New York was having its own problems at the time, and the New York bankers weren't looking favorably on any municipal offerings, especially municipalities on the verge of bankruptcy.
But today, less than two years later, Niagara Falls is not only out of financial trouble, but it has what the mayor's secretary calls "a tidy little nest egg" of some $1.6 million of surplus. And for a number of reasons, the city's economic picture is better it has been in decades.
The events that eventually saved Niagara Falls actually began about two months earlier, when Mayor Michael O'Laughlin, City Manager Donald O'Hara and Carborundum Co. (the city's largest employer) President William Wendel organized the City Management Advisory Board (CMAB) - a blue-ribbon group of private-sector and public-sector business and finance leaders.
That board, working together over several months, eventually led the city out of bankruptcy and into an era of surplus.
But on that hot summer day in July 1976, something had to be done right away.
"We met with the local bankers in my chambers," remembers Mayor O'Laughlin," and they greed to buy $7.5 million of the notes. Then, we went to the community and asked them to buy notes in $1,000 denominations. They lined up around the building the next day and bought another $1.3 million. I bought a few myself. I wish now that I had bought more: We paid 9.3 percent on the whole offering."
The community response was so impressive that only one day later, shortly before default would have occured, two Manhattan brokerage firms picked up the remaining $11.2 million of the note issue.
The work of the CMAB in cutting city costs and streamlining services was so succesful that when the time came to roll over the debt the following year, the entire offering was rolled over at 4.4 percent interest - cutting the interest cost to the city by more than half - a strong vote of confidence.
It was not an easy or pleasant task. The city's budget needed serious pruning, and there was added difficulty because many jobs, particularly in the police department, had been added without budget authority.
For example, city officials created a new 30-man police force just for the new convention center. The problem was that there was no place in the budget for such a police force. "I don't know how they expected them to get paid," said Mayor O'Laughlin, whose term in office fortunately began after the hires were made.
There were painful city council meetings at which the tough recommendations of the CMAB voted on, and usually approved.
More than 200 persons, including several dozen police officers, attended one meeting, during which it was decided to lay off several police officers. The proceedings were interrupted several times by loud clicking noises - the sound of police revolvers being crocked.
In all, the 1,100-person city work force was cut by 200. Most of the cuts were nonessential services. for example, some 20 members of the sanitaiton crew involved in "roll- out service," the rolling of garbage cans from backyards to the street for other city employes to pick up, were laid off. "People can bring their own garbage to the curb," said Councilman Bruce Battaglia, an aggressive young businessman who led the efforts for cutbacks.
One cutback caused considerable consternation in the community. All 60 of the town's crossing guards were eliminated. A city relations campaign asking parents, children and teachers to help out by watching the dangerous corners during pre-school and after-school hours was successful but did little to quell anger in the community over the potential dangers to children. But when the protest grew loud, "We just stnewalled them," said Battaglia.
The sanitation and crossing guard cuts alone saved the city $500,000 a year.
At the police department, some 40 officers were cut, forcing a change in many police policies. For the first time, citizens were asked to help out their local police. "Now, when someone calls in to report a stolen bike, we don't send out a patrolman," says Battaglia. "We ask them to come down to the police station to report it. I mean there wasn't anything we could do about those kind of things on the spot anyway. We still go there for anything important."
When the city asked the police and firemen to put a moratorium on raises for a year, all the unions except the police brass refused. Those decisions came back to haunt the unions, when that refusal to accept the moratorium resulted in eventual layoffs.
And, of course, the people suffered a little. "We haven't had a street paved in three years," said Councilman Joseph Smith. "And last year we bought our first garbage truck in three years. But the problems are all behind us now, and we won't make the same mistake again."
But what made the difference in the long run where the institutional operating changes recommended by the CMAB and adopted by the city council, and the efforts of the city to attract new business while the problems were still being settled.
Basic control systems over all expenses were creates, preventing such things as duplicate payments. Monthly forecasts were established to help city managers predict upcoming crises. The city pooled its liability insurance policy with the country, saving an estimated $160,000 annually. Equipment purchasing in public works areas was in some cases replaced by equipment leasing, saving about $30,000 a year. Unnecessary street lighting was reduced, saving about $60,000 to $100,000.Seventeen city departments were reorganized into 10. Zero-based budgeting is being employed by department heads.
And perhaps even more important, the city took an aggresive step toward increasing revenues by beginning a major effort to attract convention and tourist business back to the once-famous honeymoon resort.
An impressive convention center completed three years ago has begun to pay off. With a newly established Convention and Vistors Bureau beating the bushes for business, the city has seen a 50 percent jump in hotels occupancy tax incomes from the last quarter of 1976 to the last quarter of 1977. And convention business is crucial. The bureau's studies show that the average conventionaire spends $250 over three days in town, while the average tourist is good for about $55 a day, and only stays an average of a day and a half.
A new shopping emporium with dozens of stores and shops is scheduled for construction downtown, and the city is planning a 2,000-car shopping ramp for construction next to it. Both will be linked to the convention center complex.
The plan appears to be working. The number of conventions in town has jumped from 32 in 1975 (bringing in about 36,000 people), to 96 last year (with nearly 100,000 people). Even more important, the dollar value to the city conventions in 1975 was $5.4 million, while in 1977 that figure jumped to $26.8 million.
And more than 182 conventions already have been booked.
As he sits down in the restaurant of the local Ramada Inn, Mayor O'Laughlin is preparing to leavefor New York City and a press conference and appearance before securities analysts to tell the story of his city's magnificant turnaround.
He is content in his feeling that he can truthfully tell the audience that his city has done what their city - New York - has not been able to do. Niagara Falls has bailed itself out.
He has time for one more drink. After keeping the waitress waiting for about 30 seconds, he looks at his interviewer, smiles, looks at the waitress, and orders:
"I'll have a Manhattan on the rocks, please."