12/04/08 07:35 AM

By Matthew Spina
NEWS STAFF REPORTER

Erie County’s state-appointed control board ventured into the credit market again recently to sell bonds on the county’s behalf and to finally pay road contractors for their work.

But the deal was stopped in its tracks when the county comptroller told Wall Street credit analysts that the control board was overstating its powers.

The control board was asserting that it had the power to take out long-term debt if needed — and continue to operate for decades as a result — even though County Executive Chris Collins and the Legislature have barred a long-term loan. Collins and the Legislature set a strict rule that any control board loan be repaid in a year.

“Both our Legislature and the county executive have expressed, unequivocally, that they will not allow the control board to do long-term borrowing,” said County Attorney Cheryl A. Green, who has demanded the control board add key restrictions to the financing agreement it showed Moody’s Investors Service. Until then, Collins will not sign it.

Kenneth Vetter, the control board’s executive director, calls Green’s words the “poison pill” that prevents the sale. Robert M. Glaser, board chairman, says county officials, including Comptroller Mark C. Poloncarz, are determined to block the control board from borrowing, even though the board can save taxpayers thousands or millions of dollars over time.

Since early last year, the control board and county leaders — the Legislature, comptroller and executive — have been fighting, compromising and fighting again over how to borrow.

The county has now gone more than two years without borrowing for critical road and bridge repairs as well as other improvements. Contractors who performed work on good faith are demanding payment, and more lawsuits against the government are expected.

DiPizio Construction, the contractor on this year’s Wehrle Drive makeover, might collect $50,000 in interest as part of a court agreement requiring the company be paid by Jan. 31.

The control board says it should act as the county’s borrower because, with its superior credit rating, it can save on repayment costs. It would repay loans with the county sales tax income it intercepts.

The Legislature, Collins and Poloncarz counter that control board operations consume some $700,000 a year in county tax money and that the board will become less necessary as the county continues to recover from the meltdown of 2004-05.

Both control board officials and county leaders agree on this: Contractors deserve their money, and the government needs another loan. The $40 million the control board had hoped to borrow next week would have gone toward major improvements and replenished the daily operating fund.

Figuring the control board’s deal is dead, Poloncarz wants to close a private deal with banks for $40 million, as he did in securing a $75 million bridge loan in September — when another control board deal collapsed as the credit market imploded.

Such deals, however, are more expensive. Repaying the September bridge loan will cost taxpayers $1 million more than if officials had settled their conflict and sold bonds months earlier.