Erie County’s state-appointed control board will let government officials sell to an outside company the right to collect and keep overdue property tax payments, an agreement that could avert a property tax increase next year.

But the control board’s provisos left county administrators scratching their heads late Friday.

One caveat forces government officials to spend extra proceeds from the sale — money they had not already budgeted — on long-term projects. Doing so will lessen the amount that officials will borrow later this year to replenish the money now going toward road and bridge repairs and other expensive improvements.

A second proviso: When it comes time to borrow the money, the control board will handle the loan, not Comptroller Mark C. Poloncarz, because control board members have long argued their agency’s superior credit rating lets them borrow more cheaply.

“It’s time to stop playing catch with a greased football,” said the control board’s vice chairman, Robert Glaser, who led the panel’s meeting Friday in the absence of Chairman Anthony J. Baynes. “I think that with everybody involved at whatever level, we need to start moving forward toward the same end zone.”

He said the board wanted to avoid the problems that would arise if it didn’t approve the deal: a loss of cash that had been counted on for this year, about $6 million, and a potential property tax increase of about 2 or 3 percent for 2008.

Allowing the deal also helps ensure that arts and cultural groups and the Convention and Visitors Bureau collect the county aid they’ve been promised for next year. So in a 4-1 vote, the control board authorized the contract with Xspand of Morristown, N.J., with the strings attached.

The county’s elected leaders and their staffs did not leave the meeting in a buoyant mood. The Legislature, the budget director and Poloncarz had wanted that the extra proceeds poured into a rainy day fund where the money would generate interest and help them rescue Erie County’s worst-in-thenation credit rating.

Also, many county leaders don’t want the control board borrowing money for county government because it will guarantee the Fiscal Stability Authority exists for 30 more years, as long as it will take to repay the loan.

Control board members have comebacks for both of those concerns. Executive Director Kenneth Vetter said state law lets the control board exist until 2039 anyway, and if the board is no longer needed before 2039 it can go dormant and turn over some of its duties — repaying lenders, for example — to another state agency.

As for the rainy day fund, Glaser and other members said they could not have prevented it from being raided after being fattened by the Xspand money. But they could force the county to establish the “pay-as-you-go” fund for capital projects, which lets the government borrow less and lower its repayment costs over the long term.

County leaders late Friday were examining the control board’s caveats and wondering if they could be met before Xspand withdraws its offer. For example, since the deal apparently cannot go forward until the Legislature and County Executive Joel A. Giambra formally ask the control board to borrow money, will the lawmakers take a swift vote or lock themselves in debate given their disdain for the Fiscal Stability Authority?

Poloncarz had already sought offers from underwriters interested in handling the county’s bond sale for him. Now he’s facing the prospect of deferring to the control board, which has spent thousands of dollars getting ready to borrow money. The longer the government must wait to borrow, the more it risks a cash crunch, Poloncarz said.

The control board would repay any loan not with state dollars but with county tax dollars. Like other control boards in New York, it intercepts the sales tax money Albany tax collectors are returning to local governments, taking what it needs and advancing the rest to the entity it oversees.

Vetter explained that if officials estimate in October they will derive from Xspand $20 million beyond what they had budgeted for this year, they must lessen the amount to be borrowed from the current $51 million to $31 million. Officials can work off estimates, he said, because Xspand’s final payment for 2007 won’t arrive until December.

Xspand is willing to pay for the right to collect and keep overdue tax payments on properties with liens placed on them, plus the 18 percent interest penalty the company can add by county law. It is willing to give the county 105 percent of what those delinquent taxpayers now owe, including their current penalties.

At last count, the value of those liens placed in 2006 and this year amounted to $26.5 million, but the total keeps changing as penalties pile up or property owners make payments to the county. The right to collect those back taxes would cost Xspand $28 million.

Stanley J. Keysa was the only control board member Friday to vote against the contract because he said the control of an outside company makes it difficult to sell abandoned properties and leaves them in a legal limbo that contributes to urban blight. County leaders countered by saying the contract lets them free any property from Xspand’s control by buying back the lien.

“I think this Xspand proposal stinks. It really stinks,” said board member Joseph Goodell. But like members John Johnson, Kenneth Kruly and Glaser, he allowed it if the county meets the conditions.

mspina@buffnews.com