The Erie County,N.Y., comptroller's office expects to issue a request for proposals this week for underwriters for a $63.1 million bond anticipation note deal that has broken a deadlock between the county and its control board.
Under an in principle agreement worked out last month between the Erie County Fiscal Stability Authority and County Executive Chris Collins, both the county and control board will determine the cost of issuing the Bans on their own. If the control board, with its much higher credit rating, is able to generate more than $100,000 in savings, compared to the cost of issuance by the county, then it will issue the Bans. If the control board's savings would be less than $100,000, then the county will issue the notes.
"Doing the 12-month Ban is a compromise that lets us get the money borrowed for our 2007 and 2008 capital projects," Collins said. "It's a way of ending the stalemate where they couldn't borrow without my permission and I couldn't borrow without theirs."
If the agreement sticks, Comptroller Mark Poloncarz said he expects the Bans to price in late July.
The county's capital program was brought to a near standstill last year when neither the county nor the control board would allow the other to issue bonds for its 2007 capital program. The control board was created in 2005 when the county faced a fiscal crisis.
By statute, the control board has to approve the county's annual budget and four-year plan. If it doesn't, the board goes from an advisory role into "hard control," which gives it the right to approve or deny bond issues. The board is in hard control now, having rejected Collins' four-year financial plan last month.
The standoff over which entity would issue bonds continued when the board rejected the newly elected Collins' request for the county to issue its own bonds this year. Authority executive director Kenneth Vetter said the higher rated control board could issue the bonds more cheaply.
If the board sells bonds, it will stay in existence as long as the bonds are outstanding, to which Collins objected. The two sides reached a compromise in February, but that fell apart last month. The proposed Ban issuance will cover both the 2007 and 2008 capital plan.
About $13 million of the proceeds will be used to repay the county's general fund which has been funding some capital projects on a pay as you go basis. The proceeds will finance capital projects that include a new scoreboard at the stadium where the National Football League's Buffalo Bills plays as well as new roof at the convention center, an emergency communications system and bridge and road work.
"This can get things moving at this point, but there still has to be a further discussion because both sides of this issue have indicated that regardless of what happens with the bond anticipation note, this does not lock in one side or another to do the bonding in the future," Vetter said.
It's the future that bothers Poloncarz since next year the county could find itself in the same position if again the control board refuses to let the county sell bonds on its own when the Bans mature.
"All it does is delay the final decision until next year," Poloncarz said. "I didn't think it was in the best interest [of the county] other than ensuring that the projects get done."
But Collins said he expects that a management initiative borrowed from manufacturing called "Six Sigma" that he is applying to county government will bring in enough cost savings to garner the board's approval next year. This would put the control board back into advisory status and the county could then issue bonds without the board's consent.
"I will never allow them to borrow," Collins said of the control board. "As long as the county has an investment grade rating, [the board] will never be given a determination of need for a 30-year bond. They know I'm serious. No one wants to stop our capital plan from moving forward. We needed to get past the emotion of the 18 month standoff. I don't expect us to be there again."