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Regan explains need for county to borrow Calls for phasing in 50% property tax hike

The chairman of Erie County's state-appointed control board says lawmakers will return to business as usual if they get a tax windfall totaling $80 million next year.

That is why he agrees the county should raise taxes more gradually and borrow money to help itself over the next year's hump.

"With $80 million in hand, it is doubtful they will seek taxpayer savings," Edward V. Regan, the board's chairman, said of county lawmakers. "Their past inaction supports this conclusion."

The control board would arrange the "deficit financing" that, Regan says, the county needs to phase in a 50 percent property tax increase over two years and allow money-saving reforms to take hold. His state-appointed panel then would continue as long as the loan is outstanding -- at least until the year 2019.

The transaction also would generate closing fees for The PFM Group, the control board's financial consultant, which helped county officials conclude the county should borrow money next year to make ends meet. PFM has collected $250,000 for helping Buffalo's control board borrow money.

Since County Executive Joel A. Giambra unveiled his four-year financial plan Tuesday, county leaders have not debated whether his proposed 50 percent tax increase over two years can be avoided but whether it goes far enough to stabilize the finances and avoid expensive deficit borrowing.

Legislators Albert DeBenedetti, D-Buffalo, and Charles M. Swanick, R-Kenmore plan to push another sales tax increase. They want to avoid the long-term loan and -- more so in Swanick's case than DeBenedetti's -- avoid a property tax increase so more people, not just property owners, help close next year's deficit.

Interim Comptroller James M. Hartman says repaying the $45.6 million Giambra proposes to borrow would cost $66 million over 13 years. He calls that a poor use of tax dollars and suggests county officials impose the total 50 percent increase for next year -- generating $80 million -- or raise the sales tax to 8.5 percent from 8.25 percent.

A 50 percent tax increase would add $248 a year to the tax bill on a home assessed at $100,000. If legislators temper the higher property tax with a higher sales tax, the bill would be about $160 a year on a $100,000 home.

Hartman says deficit borrowing would prevent the county from improving its nearly junk-status credit rating and hamper its ability to borrow for more legitimate needs. And if Giambra's reforms don't actually save money, the county still would face large budget holes. Sheila Kee, a control board member and former county budget director, also maintains that deficit financing isn't the best way to return the county to solid ground.

But what about the taxpayers? In Erie County the property tax burden towers 42 percent more than the national average when considering the layers of city, county, town, village and school taxes.

The sales tax increased by a quarter of a percent July 1. Can't the government find savings to make do with what it collects now?

"Tinkering around the edges of reform no longer will do," said the Buffalo Niagara Partnership, an organization of business leaders, which complains that architects of Giambra's four-year plan set out to find "the most politically feasible" revenue increase before looking at ways to save.

In August, the Partnership gave Giambra a 350-page report showing how he and the Legislature could save $75 million next year if, among other things, they asked more of employees and got out of the business of providing health care and plowing roads when towns could do the job.

For the most part, the Partnership was unimpressed with the extent to which Giambra used its recommendations. "The county plan ignores the widespread cry of the community against the ever-increasing role and strain of local government," Andrew J. Rudnick, the partnership executive director, and Robert Gioia, the study panel's chairman, said in a written statement.

The Partnership also said the county must stop paying today's expenses with tomorrow's revenue. In that vein, it agreed with Hartman and disagreed with Regan by calling deficit financing "a major flaw."

Any cordiality in relations between Regan's control board and the Legislature has waned. Most lawmakers had not wanted the state panel of overseers, even after State Comptroller Alan G. Hevesi concluded that the county needs "adult supervision."

Some lawmakers, such as Legislator Demone A. Smith, D-Buffalo, chairman of the Finance and Management Committee, criticize the control board's costs: an average of $40,000 a week for its financial consultant and a total $1.28 million budget for the last five months of the year, all provided by county taxpayers.

Thursday, lawmakers agreed to tell the control board they would like it to file its paperwork with the Legislature and to file county ethics statements, detailing sources of income to flag any conflicts of interest. "There's no way they should be allowed to do whatever they want," Smith said.

Regan then said the Legislature's past performance indicates legislative inaction would follow a huge property tax increase.

"I would hope that Ned Regan will give the Legislature the opportunity to respond to this four-year plan and also any type of revenue enhancement that must be considered," said Legislature Chairman George A. Holt Jr., D-Buffalo. He said lawmakers can't just radically agree to get out of the health care business or make other wholesale changes to human services. "I truly believe his statement is somewhat premature," Holt said.

But Minority Leader Michael H. Ranzenhofer, R-East Amherst, said Regan is right.

"When you look at raising taxes first, efforts to reform the government evaporate," said Ranzenhofer, a member of a bloc of lawmakers consistently opposing any tax increases.


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