Erie County officials are considering tiptoeing back into the bond market, but it will come with a cost.
County Comptroller David J. Shenk has recommended that the county do its own long-term borrowing for the first time since 2006, rather than have the state-appointed Fiscal Stability Authority issue general obligation bonds for county projects this year.
A deputy budget director for County Executive Mark C. Poloncarz also has signaled that Poloncarz is exploring that option with an eye toward improving the county's credit ratings in the long term.
"The county needs to re-enter the markets at some point," Deputy Budget Director Timothy C. Callan recently told county legislators, to explain Poloncarz's position. "The longer we're out, the worse it hurts us."
But directors of the advisory control board point to an annual savings of about $65,000 if the board does the borrowing again this year with its superior credit rating.
"I think the consensus of the authority directors is that if the county can save money by using the fiscal authority as a bonding authority, it would make sense for them to do that," said James Sampson, chairman of the control board. "But then again, we understand we're in advisory capacity and the county executive has the capability to make that policy judgment."
County lawmakers already have decided to borrow $24.2 million for an annual list of large projects that includes upgrading parks, rebuilding roads and maintaining Ralph Wilson Stadium. The money also includes $3 million the county has pledged for a project to build a new polar bear exhibit at the Buffalo Zoo.
Poloncarz and the Legislature must decide this month whether to once again borrow through the control board or return to borrowing money under its own authority.
Shenk and other county officials acknowledge that the control board can borrow the money more cheaply because its credit rating allows it to access lower interest rates, but they argue that the county's improving financial health and the relatively small size of the year's capital borrowing makes it an ideal time for the county to once again issue the general obligation bonds.
"Given current market conditions, the county's relatively small amount to be borrowed for capital projects and its pace of retiring debt over the next several years, this is an excellent opportunity for the county to re-enter the market place," Shenk wrote in a letter to Poloncarz in which he formally recommended that the county do its own borrowing.
The measures of the county's fiscal health reported by three Wall Street credit-rating agencies have steadily improved in recent years, but county officials worry that the county will not obtain higher ratings if it does not issue general obligation bonds on its own.
"Our judgment is that entering the market would have a marginal effect on the rating," Sampson said. "It really is about the fiscal health of the county and the economy."
Sampson recently met with Poloncarz to discuss the issue and said the Poloncarz administration has been "very forthcoming and very transparent in the information they share and how they communicate with us."
The control board has been in an advisory status since 2009 but continues to review the county's financial choices.
"We will continue to monitor their four-year plan and their budget very closely as it relates both to revenue and expenses," Sampson said.