ERIE COUNTY LEGISLATORS ENCOURAGE COUNTY EXECUTIVE POLONCARZ
TO COMPROMISE, OR MAKE SWIFT PAYMENT
OF MORALES SETTLEMENT
(Buffalo, New York) – On Monday, Feb. 13, 2012, Erie County Executive Mark Poloncarz’s Office forwarded a letter to members of the Legislature regarding the $7 million settlement payment the County owes to Janette Morales. Morales is the woman who nearly drowned in a city pool while ErieCounty was responsible for the pool’s management, in accordance with the now terminated City/County Park’s Agreement. The letter (attached) was from her attorney, Jed Dietrich, and it reminds the County of its obligation to pay the $7 million balance on or before March 5, 2012, or else significant interest payments will be assessed.
The letter was provided to the legislators via an email chain that included messages between the CountyAttorney’s Office and the Executive’s Office emphasizing the need for a “deal” with the legislature to make payment.
“No one in the Legislature is unaware this payment needs to be made, and no one is proposing we don’t pay what we owe. We just disagree with the CountyExecutive on how to pay it, and we fully understand and aren’t bothered by the fact that it might have to be paid in cash,” said Legislator Lynne Dixon. “We have made great strides in improving the county’s finances over the last few years, and I don’t think it is at all appropriate to break out the taxpayer’s credit card and rack up more debt that future generations will have to pay.”
During the past few years, Erie County Legislature Republicans made many tough decisions that paid off nearly $100 million in taxpayer debt; reduced the size of the county workforce; and transferred many programs and services to the private sector, saving taxpayers millions.
“At the same time, governments all around us are adding debt and cutting services, we managed to build a sizeable surplus in ErieCounty by making tough decisions that respected the taxpayer’s money. We can’t just ignore that progress and return to the tax, borrow and spend policies of the past” said Legislator John J. Mills.
All members of the Republican Caucus recently had private meetings with the CountyExecutive and the Deputy County Executive where this issue was discussed. The Caucus met with the CountyExecutive on February 7, 2012 to discuss this issue as a group in more detail. At that meeting, the Republican Legislators proposed to the County Executive that they would meet him more than halfway and agree to borrow $4 million if he agreed to pay $3 million out of the surplus or risk retention fund.
“At that time, County Executive Poloncarz wasn’t interested in the compromise we were offering, and chose to continue to lobby for the settlement to be paid mostly with borrowed funds, which is something we feel is irresponsible to support,” said Legislator Joseph Lorigo.
Legislator Kevin Hardwick questioned why the Legislature would borrow on behalf of the taxpayers to pay the bill. “Am I missing something here? Why wouldn’t we pay the bill on time? We borrow $4 million and pay $3 million out of the county’s legal fund that has a balance of $5.5 million,” said Legislator Hardwick.
“As the fiscal stewards of ErieCounty, we have to make practical decisions that protect the taxpayers. Borrowing a large sum of money to pay for a one-time expense is not practical. Despite my view that we should pay the full $7 million with cash that we have, I am willing to compromise with the CountyExecutive on the matter,” said Legislator Edward Rath.
To clarify, all members of the Legislature’s Republican Caucus understand the importance of paying this bill on March 5, 2012 in order to prevent a $155,342 late penalty followed by a $1,726.03, daily fee for interest charges. They refuse to ignore the tough decisions of the past few years that brought the County’s fiscal health back, and furthermore, refuse to return to the policies that led the County to the brink of bankruptcy just a short time ago.
This letter, sent from the CountyExecutive’s Office in an attempt to build pressure on the members, will not steer them from the important goal of ensuring taxpayer dollars are always wisely spent, and that the County doesn’t kick the proverbial can even further down the road.
Erie County Executive Mark C. Poloncarz on Thursday blasted the Erie County Legislature’s Republican Caucus for their display of political gamesmanship at its worst in blocking a plan to pay a $7 million legal settlement and putting the County at risk of incurring hundreds of thousands of dollars in interest penalty charges and jeopardizing its ability to pay settlements related to other preexisting lawsuits.
“In rejecting the compromise plan I have put before them, the Legislature Republicans have made it entirely clear they are more interested in ‘Washington-Style’ political gamesmanship than acting in a fiscally responsible manner and getting this settlement paid before the March 5th deadline,” Poloncarz said in a news release. “It is time to put petty politics aside and do what is in their constituent’s best interests before it is too late.”
According to the news release from Poloncarz:
In early January, Republicans rejected the prior administration’s initial request to borrow $7 million in a low-interest judgment bond to cover the cost of the lawsuit settlement, instead putting forth a plan that would designate $3 million from the County’s risk retention fund (“Risk”), while borrowing the rest ($4 million). While Poloncarz has come to the table several times offering compromises of $6 million borrowed and $1 million Risk, $5.5 million borrowed and $1.5 million Risk and now today, $5 million borrowed and $2 million Risk, Republicans have refused to compromise and move from their initial proposal.
Poloncarz added, “While I have come to the table several times, the Republicans have unreasonably refused to compromise based on one bogus claim after another. The latest claim is that they are saving taxpayers hundreds of thousands or millions of dollars in interest charges associated with the judgment bond. In reality, their hardline stance is over a little more than $4,000 a year, while they insist on gambling with about $200,000 in interest penalty charges. How is that a compromise or fiscally responsible?”
A $5 million judgment bond would require a total debt service of $301,958.33 (which includes interest and the cost of issuance), while a $4 million bond’s debt service would cost $260,250.00, a difference of $41,708. Over the 5 year life of the bond, that would amount to $8,341.67 a year. Coupled with the $4,000 in interest lost due to non-investment of $1 million in conjunction with the Republican’s plan, the net taxpayer savings are reduced to $4,341.67 a year.
As per the terms of the stipulated settlement, if the $7 million settlement payment is not remitted to the plaintiff by the March 5, 2012 deadline, the County will immediately incur a $155,342 interest penalty with an additional $1,726.03 in penalty charges each day thereafter. The legislature will have one last opportunity to approve a plan on February 23, 2012, before the payment deadline. If a plan is still blocked by Republican inaction, the next Legislative Session will not be until March 15, 2012, ten days after the deadline, which would mean at least $172,602 in penalty charges would be assessed before a potential resolution.
While designating an additional $1 million out of Risk (as the Republicans have proposed) rather than borrowing does not lead to any real interest savings, it also has the negative effect of jeopardizing the County’s ability to pay settlements for the hundreds of preexisting lawsuits initiated by the previous administration. Currently, the risk retention fund has approximately $5.5 million and under the Republican proposal that would be reduced down to $2.5 million.
Poloncarz concluded, “Not only does their unreasonable refusal to compromise not save the taxpayers any actual interest, but it also puts in jeopardy the County’s ability to self-insure itself against lawsuits by depleting the fund to pay settlements below what is necessary. The Republicans are holding this agreement hostage and putting the County at an unnecessary risk just to prove a point. I would think they would hold taxpayer dollars in higher regard than that.”