Erie County’s state-appointed control board has overestimated the money it could save as the government’s borrowing agent, says the Erie County comptroller.

Comptroller Mark C. Poloncarz is urging the Legislature and County Executive Chris Collins to continue to bar the control board from borrowing on the government’s behalf.

The two-year dispute over who should borrow the millions of dollars needed for major projects — the control board or Poloncarz at the Legislature’s request — has all but halted this year’s repair program.

The long-awaited reconstruction of Wehrle Drive, Zoar Valley Road, Groth Road, the annual upgrades to Ralph Wilson Stadium and the repacement of the county correctional facility roof, among other things, must await an agreement among the control board, the county executive and the Legislature.

The dispute has created hardships, like the one affecting students in the Springville-Griffith Institute School District. Superintendent Brenda S. Peters has told county highway officials that she won’t be able to send buses along Groth Road and Zoar Valley Road in the next academic year because of the washouts, potholes and absence of safe shoulders.

“We have children who live down those roads, and we can’t send buses down them any more,” Peters said Monday. “We have had quite a few times when the bus has gotten stuck or can’t turn around.”

The control board, if allowed to borrow, would supplant Poloncarz as the government’s borrower.

Poloncarz recently asked the county’s financial adviser, First Southwest Company, to analyze the control board’s claim that it can save $2.8 million over the life of a 30-year loan, or the equivalent of $67,000 a year in today’s dollars.

First Southwest, according to Poloncarz, found the control board will save less than it claims, or anywhere from $17,435 to $51,000 a year depending on how much is borrowed and the cost of bond insurance.

The estimates by Poloncarz and the control board vary widely because they are making different assumptions about how much each will pay to insure its bonds against default.

While defaults are rare with government general-obligation bonds, borrowers usually buy insurance so they can receive a lower interest rate.

Poloncarz assumes the control board will be able to insure its bonds more cheaply than he can, because the control board has a better credit rating than the government itself.

But control board officials expect to sell their bonds with no insurance at all.

“The assumption of nearly a million dollars in insurance costs is simply an overstatement because we don’t need insurance,” Executive Director Kenneth Vetter said Monday after reading the Poloncarz report.

Vetter said the comptroller’s analysis does not change the board’s position: If the county’s elected officials can prove they can borrow more cheaply through Poloncarz, then Poloncarz should arrange the loan.

Until then, the control board says it should handle the next transaction, borrowing about $86 million for road and bridge repairs and upgrades to county facilities, such as the addition of a children’s zoo at the Buffalo Zoo and the on-going improvements at the botanical gardens.

In his letter to Collins and the Legislature, Poloncarz again argues that any savings the control board claims should be balanced against the cost to run a control board over the 30 years it will take to repay the debt. While the Erie County Fiscal Stability Authority was created in Albany with $18 million it can give the county in “efficiency grants,” it spends about $600,000 a year on its operations and must exist as long as it has debt.

Because of the stand-off, the government never borrowed the approximately $34 million identified in 2007 for projects, not including those at Erie County Medical Center.

mspina@buffnews.com

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