FEBRUARY 18, 2009

COUNTY BORROWING REMAINS DEADLOCKED; THIRD PARTY INTERVENTION NEEDED

Recent failed attempts to resolve who should borrow for county capital projects, either the county or the Erie County Fiscal Stability Authority (control board), continues to be a deadlock in which there is a need for third party resolution.

The disagreement over who can borrow more cheaply is further affected by the recent Fitch Ratings upgrading of the county's credit rating and a determination of a stable outlook. The upgrading will add to the county officials' argument that they should borrow. The improved rating will further the county and control board deadlock rather than resolve it.

The Erie County Legislature unanimously passed a bipartisan resolution on January 29 calling upon New York State Comptroller Thomas DiNapoli to act as a third party to assist in resolving the borrowing crisis.

A bipartisan group of county legislators met in Albany on February 9 with the State Comptroller and members of his staff to outline the serious repercussions of the lack of implementing multi year capital project borrowing and to appeal to the comptroller for assistance in resolving the ongoing impasse. The Comptroller and his staff indicated that they lack the authority to intervene.

The one third party option is to go back to the Western New York state legislative delegation and seek reintroduction of legislation to allow the county to borrow. An earlier attempt at a legislative resolution was vetoed by Governor David Paterson.

A second option involves the federal infusion of Medicaid dollars as a result of an economic stimulus package. The offset to budgeted Medicaid costs would allow the county executive to argue that the budget is balanced. A balanced budget could lead to a soft, or advisory, control board and therefore allowing the county to borrow.

The state legislation that created the control board gave it powers to approve or reject requests for borrowing. The only way for the control board to borrow is for the County Executive to issue a "declaration of need". A few months ago, the county administration and control board officials attempted a one-year Bond Anticipation Note, but could not agree on financing language.

Failure to resolve the borrowing crisis jeopardizes state and federal matching funds, road and bridge repairs, needed infrastructure improvements, contractual obligations, and has ripple effects with contractors, their employees, vendors, and suppliers. These projects are a major economic development tool.

The borrowing crisis could be resolved at the state level by a third party involving the Legislature and the Governor or the infusion of federal stimulus dollars. In any case, the borrowing crisis cannot go on.

The Legislature has authorized $89 million in projects in 2007 and 2008. To date, the county comptroller has advanced $26 million in cash, at the request of the administration. The 2009 county budget plans for another $86.1 million of projects. Without a successful resolution to the capital borrowing, any federal economic stimulus dollars are in jeopardy.

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