Spending Freeze Likely in Niagara Falls

March 30, 2012 Updated Mar 30, 2012 at 7:21 PM EDT

By Ed Reilly

March 30, 2012 Updated Mar 30, 2012 at 7:21 PM EDT

NIAGARA FALLS, NY ( WKBW ) On Monday, the Niagara Falls City Council will vote on enacting a spending freeze which would take effect immediately.

Basic services will still be provided, but anything else will come to a "screeching halt," says Council Chairman Sam Fruscione.

Over the past three budget years, Niagara Falls has been anticipating approximately $18-million dollars per year from the Seneca-Niagara Casino.

The payments are required under a 2002 compact between the Seneca's and New York State.

However, the money has been held up due to a dispute between the Seneca Nation and New York State over gaming at racetracks.

The Seneca's say they are promised exclusive gaming rights west of State Route 14, and "Racinos," set up at locations like the Buffalo Raceway, are a violation of the 2002 compact.

The matter is now in arbitration, but close to $400-million dollars is being held in escrow until the issue is decided.

The City of Niagara Falls put together budgets in 2010, 2011, and 2012 that included casino money revenues.

When the money didn't come in, reserve funds were used to fill the gaps - but now the reserves have run out.

"We have depleted our special projects fund balance down to zero," says Fruscione.

"So, we have no money to move forward, to pave roads, build the train station, do demolition, fix our sidewalks . . . we are done."

Mayor Paul Dyster tells Eyewitness News that all non-essential services are "going to have be looked at."

City Controller Maria Brown says if nothing is done to correct the situation, the City could face a cash shortfall of over $21-million dollars.

"I want to put the warning out now and not come to the Mayor in July and say we are out of money," adds Brown.