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Poloncarz in fight with other Erie County officials over ECMC financing

Erie County Executive Mark C. Poloncarz is engaged in a high-stakes financial dispute with political opponents in the County Legislature and the County Comptroller’s Office over how to pay an unexpected bill that’s come due: the cost of caring for the poor and underinsured at Erie County Medical Center.

Erie County owes ECMC as much as $20 million above what it already budgeted for the cost.

The dispute also involves how best to borrow for the hospital.

ECMC wants to borrow up to $200 million for a variety of needs – $100 million to pay for a new emergency room and other capital projects, and $100 million to refinance existing debt.

The county executive wants to combine the issues and have Erie County issue bonds for up to $200 million on behalf of the medical center. Erie County has a better credit rating and can do so at a lower cost, Poloncarz said. The county would apply the money saved as a credit toward what it owes ECMC.

“It’s a complicated formula,” Poloncarz said.

But County Comptroller Stefan I. Mychajliw and members of the Republican-backed Legislature majority say combining the county payment and the ECMC borrowing is irresponsible, and they say the county executive negotiated details of the plan with ECMC in secret.

“At first glance, it appears to be a risky, Ponzi-like scheme,” Mychajliw told The Buffalo News.

The fiscal fight is rooted in a type of payment Erie County is required under federal law to make each year to ECMC for the hospital’s care of the poor and underinsured. The county budgets $16.2 million annually for those payments. But it often owes tens of millions of dollars more, and with little advance notice.

The payments for care delivered to the poor and underinsured at the hospital and at ECMC’s nursing home are calculated by state and federal governments, based on care delivered several years earlier. The county matches federal dollars.

The county already has made this year’s payment, and county and ECMC officials say they don’t yet know how much additional money the county will have to reimburse ECMC. Poloncarz said the best estimate is $20 million this year.

Poloncarz said the county doesn’t have enough money set aside in its current budget to pay that amount, and he doesn’t want to set the precedent of tapping into reserves to do so.

ECMC has a long list of capital projects it wants to borrow for, headlined by a new emergency department with an estimated $45 million price tag. The hospital also needs money to pay for new generators, boilers and chillers; windows and other parts of the building exterior; elevators; and other construction and renovation work, according to Thomas J. Quatroche Jr., ECMC’s president and CEO, and documents filed with the Comptroller’s Office. The work adds up to $100 million.

Further, Quatroche said, the hospital wants to refinance the $70 million it owes on its Terrace View Long-Term Care Facility, the nursing home on its Grider Street campus that opened in 2013. The hospital would take out a 30-year loan for the Terrace View debt, and some additional debt, for a total of $100 million, officials said.

Poloncarz came up with the idea of having the county take out the bond for either the capital projects, alone, or the capital projects and the refinanced debt, for a total of $200 million. The county can save ECMC money in future interest payments with its better credit rating, he said. ECMC would make the payments on the bond, and Erie County would apply the savings on the interest as a credit toward the money it owes ECMC.

Poloncarz, a Democrat, said the arrangement is perfectly legal, and appropriate, and it’s the same credit mechanism used by the administration of former County Executive Chris Collins, a Republican, in 2011, during the financing of the Terrace View nursing home. However, in that case, the county control board handled the borrowing because its credit rating was better than the county’s at the time.

“They know that,” he said of his critics. “They’re just playing politics.”

Mychajliw said he and his staff didn’t learn of Poloncarz’s plan to combine the ECMC payment and the hospital borrowing until a month ago. He said he has reservations about the county borrowing to satisfy its responsibility to make the annual payment.

“To keep us in the dark on this like they did, there are accounting and legal issues,” said Legislator Joseph Lorigo, a West Seneca Conservative who leads the Republican-backed majority. “It’s more than frustrating.”

Poloncarz denied negotiating with ECMC in secret.

Lorigo and Mychajliw both said the county could turn to the county’s reserve fund to pay the ECMC bill if necessary.

Poloncarz must persuade eight of 11 legislators to gain approval to borrow the funds.

There are a number of deadlines approaching related to the 2017 county budget and to a round of borrowing that the comptroller does each year – to smooth out the gap between when major bills come due before county residents pay their property taxes – and Mychajliw and legislators complain there may not be enough time to fulfill Poloncarz’s wishes.

Relations between members of the Legislature majority and the county executive are at a low point, but Poloncarz is optimistic he can win enough support for his plan. Quatroche said ECMC has made every effort to engage the comptroller and legislators.

The county bond counsel is writing the language of the bond resolution, Poloncarz said. The Comptroller’s Office must forward the resolution to the Legislature, where it faces an uncertain future. Poloncarz said Monday he is optimistic that will happen by Friday.


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