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Erie County finances under Poloncarz: the good, the bad and the controversial

With less than a month before Election Day, the two candidates for Erie County executive are painting vastly different pictures of county government finances.

Erie County Executive Mark Poloncarz says its financial health has never been better since the county's fiscal crisis 15 years ago, pointing to lower debt, lower property tax rates and more spent on county services.

"We've invested in parks, libraries and ECMC, without raising taxes," he says in his latest campaign ad. "It's what you deserve."

His challenger, Republican-endorsed County Legislator Lynne Dixon, describes Poloncarz as a liberal spender who doesn't invest enough in county infrastructure and doesn't return money to taxpayers when times are good.

"I think we are being overtaxed," Dixon said. "We have record surpluses, and that was after he said he couldn’t afford a tax cut."

An objective look at the health of county finances since Poloncarz took office offers a mixed report card.

"Every budget that he and his administration has submitted to us has been balanced and been doable, as has his four-year plan," said James Sampson, who has led the independent, six-member Erie County control board since the first year Poloncarz took office. "We have general confidence in how the county is being managed and its fiscal health."

But critics point to Poloncarz's record of raising taxes.

"We hear smoke and mirrors about the rate," said county Comptroller Stefan Mychajliw, "but at the end of the day, I look at what Erie County government is taking out of the pockets of Erie County families."

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Poloncarz points to bright spots that indicate sound finances. County reserves are stable or growing. Long-term debt had steadily shrunk, saving hefty interest payments over time. Every year has ended with a budget surplus. The county's credit ratings have seen modest improvement. The property tax rate is low compared with other counties.

Sales tax revenue is growing, and the county has not needed to draw on its savings accounts to cover costs. Poloncarz's county budgets also have never exceeded the state's property tax cap.

Compared to the days of the red and green budget crisis under former Erie County Executive Joel Giambra in 2004 and 2005, the county's financial picture is rosy – a comparison Poloncarz makes at every opportunity. The budget crisis resulted in the closure of parks, auto bureaus and health clinics, the layoff of more than 1,000 employees and threats to public safety.

"I made a pledge to the people of Erie County to never go back to the bad old days of the red and green budget," Poloncarz said. "I cleaned up this county working with others as the county comptroller, and I keep on steering the ship as a county executive."

He points out that under his leadership, the county has fully restored or expanded services to residents, unlike his last two predecessors. Lingering union contracts have all been settled, providing more budgeting certainty. And for the first time in many years, Erie County has been removed from the state comptroller's list of counties considered to be under fiscal stress, unlike Monroe or Onondaga counties.

But as Poloncarz campaigns for a third term, he has had to fend off criticism for raising property taxes by $54 million, denying tax breaks to residents this year after the county enjoyed a windfall in sales tax revenue, and incurring unused debt for parks and roadwork projects that haven't been started.

"When we have the opportunity to give taxpayers a break, we should," Dixon said. "He denied us that opportunity this year."

Property taxes

When Poloncarz asserts that he has not raised taxes, he means he has not raised the "tax rate." In reality, property tax collections have risen 24% since Poloncarz's first budget in 2013. That does not include the proposed 3.5% tax levy increase for next year, which would bring the tax levy to $305.9 million.

These increases typically fly under the radar because property values in Erie County continue to rise, and some revenues that used to be classified as "taxes" have been legally reclassified as "fees" over time. That allows the county to maintain or lower the county tax rate each year while still collecting more property tax revenue overall.

For example, during Poloncarz's first year as county executive, the county tax rate for every $1,000 in assessed property value was $5.03. That year, the county collected $2.5 million in additional property taxes. Last year, the county tax rate was 8 cents lower, yet the county collected $15.3 million more in property taxes.

Poloncarz responded that it would be irresponsible to not raise the tax revenue needed to cover fixed, rising expenses, such as state mandates, employee raises and benefits and required contributions to Erie County Medical Center. He also referred to "the people's mandates" of supporting libraries, road work and cultural organizations.

Finally, he pointed to other former county leaders whose efforts to keep taxes low led to giant budget deficits. That includes former County Executive Joel Giambra, who didn't raise taxes in the early 2000s. That led to the red and green budget crisis that ultimately made Giambra unelectable. He didn't run for re-election.

Former County Executive Chris Collins raised taxes modestly, but he also slashed funding for many programs and was not re-elected to a second term.

Poloncarz also pointed to former Westchester County Executive Rob Astorino, who kept his pledge not to raise taxes for eight years, only to be later criticized for leaving his county in a $32 million budget hole at the end of 2017, the year he was defeated for re-election.

"I don’t have holes in my budget," Poloncarz said.

Dixon said she recognizes that fixed and mandated costs may lead to tax increases but faulted Poloncarz for refusing to provide a tax break to county residents this year when the county was benefiting from an unexpected windfall in sales tax revenue because of the healthy economy.

Members of the Legislature's Republican-supported minority caucus had lined up the votes in December to reduce the tax levy, but Poloncarz threatened to veto spending for all legislators if the vote succeeded. Ultimately, he salvaged his spending plan by cutting a deal with then-Republican Legislator Kevin Hardwick and agreeing to allocate more money for roadwork.

"We had an opportunity this year to give taxpayers a break because sales tax were what they were, and we didn’t," Dixon said. "We should have."

The county ultimately finished the 2018 budget year with a $45 million surplus. The majority of that money needed to be set aside for anticipated expenses, but that still left about $14 million.

Those millions were earmarked for the Albright-Knox Art Gallery expansion, anti-poverty programs, city-specific grants, county development projects and a long list of handouts sought by both Democratic and Republican-supported legislators for various community organizations in their districts.

While Dixon has made property tax increases a focal point in her campaign against Poloncarz, she has also played a role in making the tax increases possible as a legislator. She has voted in support of each of Poloncarz's budgets, which were amended by the Legislature, all of which included tax increases.

Last year, she broke with some members of her Republican-supported caucus to support Poloncarz's 2019 budget proposal after the many amendments proposed by her caucus to lower taxes were defeated.

Dixon said that, as a legislator, her vote is only one of 11.

"That’s why I’m running for county executive," she said. "So I can lead the conversation."

County savings

There are two areas where the county shows steady financial improvement: debt and reserves.

County reserves, or savings, have climbed steadily under Poloncarz, though the growth in the "unassigned" fund balance – the equivalent of a household emergency fund or rainy day fund for unanticipated expenses – has been modest.

The rainy day fund is not as flush as it was under former County Executive Dennis Gorski, but Poloncarz has maintained county reserves between 8% and 9% since 2014, above the required minimum percentage of 5%. He has consistently grown the cash balance in that account, unlike his predecessors, but since he has also grown net spending, the percentage has changed little.

"I like where we are right now," he said. "We have the best credit rating that we’ve ever had since before the red/green budget."

Standard & Poor's upgraded the county's rating to AA- in 2014, and Fitch upgraded the county rating to A+ in 2015. Both are considered upper-medium to relatively high investment grade ratings.

The county is under pressure to continue growing these reserves to gain an even higher credit rating, which Poloncarz said is his goal.

Paying off debts

County debt has shrunk by $98 million since Poloncarz took office, 24% lower than when he took office. With the exception of 2013, the county has retired millions more debt each year than it has added.

Poloncarz estimated that the debt reductions have saved the county $1.5 million or more over time.

"It sends another good message to the rating agencies that we are managing our funds and paying for things with the operating budget that should come out of our operating budget," he said.

The Erie County Comptroller's Office, however, released a report showing that the Poloncarz administration has also had a history of paying debt service on millions of dollars the county has borrowed for parks but then failed to spend.

As outlined in Mychajliw's report in July, Erie County borrowed more than $10 million to improve its parks over the past five years, but nearly a third of all the money borrowed between 2015 and 2018 was unspent as of the end of June.

A Buffalo News analysis of the report data showed a quarter of all the money borrowed for parks improvements during that period was neither spent nor reserved for any purpose in the budget system. Poloncarz responded that many county parks improvements are being made with borrowed cash, but he said "unacceptable" bookkeeping practices are not reflecting that work.

Dixon, his opponent, said a pattern of debt hoarding also holds true for road and bridge work, based on preliminary findings by the Erie County Comptroller's Office.

"You’re paying interest on borrowed money that’s not going to work for you," she said.

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