NIAGARA FALLS, N.Y. — Mayor Paul Dyster on Friday proposed a modest property tax increase for residents as a part of his 2018 budget plan, which he presented to the council during a time of extreme financial stress for the region's second-largest city.

In his speech at City Hall, the mayor urged the state of New York and the Seneca Nation of Indians to resolve their dispute over a casino revenue-sharing agreement, which has left cities like Niagara Falls without the millions of dollars they've been accustomed to receiving as a part of the deal.

With that dispute entering a lengthy arbitration process, Dyster decided not to appropriate any casino funding in the 2018 budget and instead outlined a number of other budget-balancing measures.

Dyster told the council his administration's budget seeks "to minimize the potentially disastrous effects" of the casino revenue dispute between the state and the Seneca Nation, even though he stands firmly with Gov. Cuomo and the state's assertion that the gaming compact requires revenue-sharing to continue.

"We're going to assert our right to receive these revenues," Dyster said in an interview after the presentation, "but we're not going to budget them."

Dyster's budget does not call for any layoffs of city workers.

However, preserving those jobs came at a cost: It essentially forced Dyster to instead propose a property tax hike to balance the 2018 budget.

His plan calls for a 2.6 percent property tax hike for residential property owners, which would calculate to an extra $32 per year for the median homeowner. For commercial and industrial property owners, he has proposed an even steeper tax hike of 14 percent, which could cost business owners hundreds of dollars a year.

Dyster said past city councils have opted to use casino money to balance the budget instead of raising taxes, but that obviously was not an option this year.

"We haven't been collecting enough tax revenues to run the government without using casino revenue to fill gaps for a number of years," Dyster said, noting that the proposed tax increase still falls under the rate of inflation. "It's just not possible to run the government without getting additional revenues sometimes."

City council members, who must ultimately approve the budget, were not available for interviews after the mayor's presentation. However, council chair Charles Walker (D) and council member Kenny Tompkins (R) both told 2 On Your Side they will work to lower that tax hike during budget negotiations.

In addition to the proposed tax increase, the mayor also seeks to consolidate certain departments in the city and implement other measures to save on operating expenses. For example, his administration's plan would cut costs at the city golf course by shifting some employees to other parks.

The administration also wants to create a policy that would discourage departments from filling vacancies as a way to save some money without layoffs. Dyster said the city has identified 73 employees who may qualify for retirement.

The financial troubles for the Falls loom well beyond 2018, however.

Earlier this month, the state comptroller's office predicted Niagara Falls would run out of fund balance by the end of the year and could face a $12 million budget gap by 2019 due to a reliance on casino revenue.

Dyster said the city has actively tried to reduce its reliance on the casino money, but it was planning to make those cuts by 2023 — not this year. That's why continued consolidation and shared services may be necessary for the city to consider as a part of a long-term plan.

"I think all aspects of our operation come in question when you're looking to cut costs so significantly," Dyster said.

Dyster remained optimistic that the state would prevail in the legal battle over the Seneca Nation, but that's far from a guarantee. In arbitration, the two sides will choose a member to represent them, and those two chosen members will then select a third, independent panel member to help them make a decision about whose interpretation of the gaming compact is correct.

It could take months for that process to sort itself out, however, which is why Dyster urged them to reach a settlement sooner. A spokesperson for the Seneca Nation said it continues to follow the arbitration process and still maintains that its obligation for revenue-sharing has ended.

In response to a question about his contingency plan if the state loses the legal battle, Dyster said that's not something he's willing to answer right now.

"We're a stakeholder in this. We agree with the state's position and we believe that we're correct," Dyster said, "so I'm not going to address a hypothetical question of what happens if things go wrong."