Erie County officials and the stateappointed control board have settled on a way to borrow money for major improvements at the Buffalo Zoo, Erie Community College and assorted roads and bridges.

But the loan would have been cheaper to secure months ago, before county leaders and the control board began their stalemate.

The fallout from the nation’s credit crunch makes it more costly to insure a government loan today than in November, when the control board blocked County Comptroller Mark C. Poloncarz from borrowing $52 million for 2007 projects.

With the added cost of the delay difficult to quantify, both Poloncarz and control board Chairman Anthony J. Baynes focused Thursday on the fact the logjam had been broken and they might soon put the dispute behind them.

“We believe this action will speed the county’s fiscal recovery,” Baynes said in a statement, adding that it will allow “critical projects to happen and provide assurance that no matching federal or state reimbursements will be lost.”

“This is a start of a new day in Erie County,” Poloncarz said during a news conference he called to describe the agreement. “I think both parties realize you are not going to just pound your fist on a table and get what you want. I think all parties agree you have to work together.”

Gridlock had settled in during the weeks it took for Poloncarz and the control board to bridge their differences — with help from the governor’s office and a financing device called “mirror bonds.”

Mirror bonds give both Poloncarz and the control board dual roles in borrowing money for long-term projects, and Poloncarz insisted they will be less costly than if he alone borrows the $52 million now.

The County Legislature has called a special meeting for 11:30 a.m. Monday to act on the compromise. Lawmakers are interested in the fact that with mirror bonds, the control board will not have an excuse to exist for the decades it will take to repay the loan.

Mirror bonds require the sales of two sets of bonds. The control board sells $52 million in bonds to investors through a Wall Street underwriter. Then the county sells its bonds to the control board, for the $52 million that the control board just raised.

When the county’s bond rating years from now returns to an A level, akin to the control board’s rating, then the bondholders swap their Erie County Fiscal Stability Authority bonds for Erie County bonds. The control board, then, has no longterm debt to justify its existence.

Both the county and the control board must pay their own bond attorneys. But there will be just one underwriter, and the control board agreed to go with Poloncarz’s choice, Citigroup, because its offer was cheaper than the one from the control board’s underwriter.

The control board will arrange the bond insurance. With the control board’s superior credit rating, it can buy the insurance more cheaply than Poloncarz can.

Erie County’s bond rating is one notch above junk status. But it has never needed the control board’s help in borrowing money via Wall Street; the control board had insisted on supplanting Poloncarz as the government’s borrowing agent because it felt that it could save taxpayers money.

The County Legislature would not let that happen. Lawmakers reasoned that the control board was trying to perpetuate its existence for the decades it would take to repay a long-term loan.

Many of the projects planned for 2007 have either been completed or are under way, but county officials have yet to pay for them.

The zoo, for example, proceeded on its new South American Rain Forest Exhibit and secured a bridge loan to pay contractors until county leaders make good on a $4 million pledge. The county, through the Buffalo Bills, still owes Mitsubishi for half of the cost of the new high-definition scoreboard.

Roads were repaved with money on hand, and now officials need to replenish their operating fund with borrowed money before they can close the books on 2007. For some other road projects, the county needs to show that it has the cash to begin them next year in order to qualify for state and federal aid.

mspina@buffnews.com

Copyright 2007 - The Buffalo News