Share this article

print logo

Loan needed to bridge revenue gap, official says

Erie County government will run out of money in three weeks, its money managers said Friday as they asked the state-appointed control board to allow a $100 million bridge loan -- routine for Erie County in recent years.

"I will run out of cash by the end of June if we don't do something," Comptroller Mark C. Poloncarz said, predicting government services will grind to a halt and thousands of employees will go unpaid unless he secures the loan he arranged with Bank of America.

His scenario was reminiscent of the 2005 budget meltdown, when a cash shortage prompted then-Comptroller Nancy A. Naples to slow payments to vendors. The county was just days from running out of gas for its vehicles because it hadn't paid its fuel provider.

The control board was not rushed by Poloncarz's dire predictions. Members said they will consider approving the $100 million loan when they meet again, at a date not yet set.

"There is a lot of material, and I think we need to review it," Chairman Anthony J. Baynes said as he tabled a decision on the request from Poloncarz and the County Legislature. But Baynes later agreed the government needs cash, and the control board needs to act this month.

Unlike in 2005, Erie County this year does not face a severe budget deficit. But this summer, as in recent summers, it needs cash to pay bills while awaiting reimbursement from the state and federal governments for welfare-net programs.

The control board delayed action in part because it wants to borrow the money on the county's behalf through its own bond underwriter, and it is locked in a dispute with Poloncarz over who can borrow more cheaply.

Baynes said that his Erie County Fiscal Stability Authority, with its superior credit rating, can obtain a better interest rate than the government itself and save taxpayers $146,000 over the one-year life of the loan. That's enough to pay three probation officers, or the staff at Isle View Park, or the staff of the Health Department's Teen Wellness Program, he said.

Poloncarz counters that the fee the control board must pay its underwriter to sell bonds on the open market shrinks the $146,000 benefit. He arranged a simpler transaction, which has no middleman. The Bank of America will advance up to $100 million at an interest rate of around 3.9 percent.

Precise rates on either loan would not be known until the date they are closed, and for that reason, Poloncarz said it is unable to predict which loan will cost less money. A review of last month's daily interest rates shows days when the county would have come out on top, and days when it would have been the control board, he said.

Baynes said he is willing to reach into his own pocket to pay for an analysis to settle the question. Yet they are at loggerheads.

The control board's frustrated wish to borrow on the government's behalf, both for short- and long-term needs, is the latest ingredient to foul relations between the state appointees and the county's elected officials.

Legislators say they have yet to see proof that money will be saved by letting the control board borrow.


There are no comments - be the first to comment