02/05/09 06:49 AM

By Matthew Spina
News Staff Reporter

Erie County’s state-appointed control board began a new push Wednesday to borrow money on the county’s behalf, stressing that it could save taxpayers $1 million a year on repayment costs in the current market.

Comptroller Mark C. Poloncarz immediately branded the claim an exaggeration, and County Attorney Cheryl A. Green, a top aide to County Executive Chris Collins, called the control board’s assertion “complete fiction.”

So despite the analysis offered by the control board’s financial adviser and its bond underwriter, the impasse over who borrows the money for Erie County’s road improvements has only hardened.

After more than two years of debate, no one has authority to borrow for the county’s sorely needed improvements to roads, bridges, buildings and community college campuses. Erie County has not borrowed for repairs since 2006, and those contractors who have done work on a promise of payment have lost patience.

The county executive has repeatedly said he will never let the control board secure a long-term loan for the government because it will then ensure the board exists for as long as it has debt. The control board, meanwhile, won’t let the county borrow the old-fashioned way, by letting the county comptroller sell bonds.

The five control board members present Wednesday, one by video conference from Florida, rejected Poloncarz’s latest proposal to sell $89 million in bonds for major repairs.

The control board then asked again that county leaders let them, the Erie County Fiscal Stability Authority, borrow money on the county’s behalf by selling their own long-term bonds.

It’s not likely to happen.

While legislative leaders said they will consider the request, Collins is not expected to give in. He has been willing to let the control board take out short-term debt, but two one-year deals fell apart for various reasons.

The state-created control board has a far better credit rating than the government itself and can save money when repaying a loan. But Collins, Poloncarz and other critics of the control board’s strategy balance any savings against the $600,000 a year that the control board budgets for its own operations.

“We as a control board do not believe that the county can afford to miss these savings in today’s economic environment,” said Chairman Robert M. Glaser, who rose to explain some charts that showed the many ways the control board benefits taxpayers.

The control board’s financial adviser, Michael Neumeister of Capital Markets Advisors, and an underwriter’s representative, Lawrence D. Seymour of Roosevelt & Cross, said that if the control board were to soon sell $89 million in bonds, it could save the government $20 million in repayment costs under current market conditions.

That would average out to $1 million a year with a loan repaid over 20 years.

Poloncarz, who watched the two testify, later said they failed to mention the effect of bond insurance. Erie County and other governments without topflight credit ratings buy insurance that protects investors from default.

While the insurance comes at a price, it lessens the borrower’s repayment costs over the life of a loan. “Of course you have to pay for bond insurance,” Poloncarz said. “But it’s not $20 million, or even $1 million a year.”

Control board Executive Director Kenneth Vetter and member Joseph Goodell said they doubted Poloncarz could obtain bond insurance these days.

Poloncarz disputes that. “If you include bond insurance,” he said, “then the savings drop below $100,000 a year. They didn’t say that because they don’t want the public to know that.”