Erie County lawmakers in uproar over ECMC financing deal

Feb. 09--Erie County Executive Mark Poloncarz said Thursday that he would consider cutting millions of dollars from county services if the Erie County Legislature kills a borrowing plan for Erie County Medical Center.

"Everything would be on the table," he said, including roads and parks.

Under Poloncarz's proposal, the county would borrow $100 million on the hospital's behalf because it can do so at a lower interest rate, but ECMC would pay off the loan. ECMC would apply the interest savings as a credit toward the tens of millions of dollars the county owes the hospital in payments for indigent care in upcoming years.

The borrowing plan would pay for ECMC's construction and renovation projects, including a new $45 million emergency department. It would also help relieve the impact of payments the county owes to the hospital for the medical treatment of poor and uninsured patients. Poloncarz called the borrowing deal a "no brainer" since ECMC -- not the county -- would be responsible for paying the debt.

County legislators expressed outrage that Poloncarz suggested they would be responsible for creating a multimillion-dollar budget gap if they vote to defeat the borrowing plan.

"That is complete and total garbage," said Legislature Majority Leader Joseph Lorigo, C-West Seneca. "He can't manage his budget because he spent us into oblivion, all the while telling us that we can afford it, when in fact, we can't. The spin blows my mind that this is a Legislature-created budget crisis."

Given the contradictory statements Thursday from supporters and opponents of the plan, legislators Kevin Hardwick, R-Tonawanda, and Lynne Dixon of Hamburg broke with the Republican-supported majority and voted with the Democrats to send the matter to committee for clarification instead of killing the borrowing deal on the Legislature floor.

ECMC officials staunchly support the deal. CEO Thomas Quatroche said Thursday that the hospital has no other way to borrow so cheaply.

"That is a lie," responded Lorigo, saying ECMC could borrow over a shorter term and enjoy greater cash flow if the county deal falls through.

Lorigo was one of four legislators in the majority who denounced the plan this week as a legally untested "scheme" that would result in greater overall debt to the county. Legislator Edward Rath III, R-Amherst, called the plan "uncertain, risky and expensive."

Rath and the rest of the Republican-supported majority expressed concerns about the legality of the arrangement, particularly the part that would require the hospital to essentially pay Erie County an upfront fee in exchange for borrowing on the hospital's behalf.

Hardwick said that if he does not receive by next week a legal opinion finding deal legitimate, he is prepared to vote against it. Republican County Comptroller Stefan Mychajliw and Erie County Fiscal Stability Authority Chairman James Sampson have also raised legal concerns about the way the deal has been structured.

Poloncarz said after the Legislature meeting that he will provide an outside legal opinion and information from the county's outside auditing firm detailing the legitimacy of the arrangement by next week.

Budget Director Robert Keating said the county would not incur any debt in the deal, but serve as a pass-through since ECMC essentially would be making all the debt payments. County leaders called Legislature opposition to the deal unfathomable. Though Erie County would be on the hook for debt payments if ECMC defaults, that would be true no matter who the hospital borrows from since it is considered a public benefit corporation.

Under federal law, Erie County must pay ECMC for care of the poor and underinsured at the hospital and nursing home. The county budgets $16.2 million annually for those payments. But the county often owes tens of millions of dollars more, with little advance notice.

The payments are calculated by state and federal governments, and the county matches federal dollars. The county paid $27.1 million to the hospital last year.

Poloncarz, a Democrat, came up with the idea of serving as ECMC's banker, essentially, and using the interest savings as a credit to apply toward the looming indigent care payments.

The initial proposal, strongly supported by both the county administration and ECMC leadership, asked for $100 million for new capital projects, led by a $45 million emergency department, along with millions more for new energy projects and improvements to the building's exterior. Another $88 million would go toward converting the remaining debt on its Terrace View Long-Term Care Facility, which opened in 2013, to a 30-year loan.

But in the face of opposition from the Erie County Fiscal Stability Authority, the county has since chosen to borrow $100 million for the new projects and leave out the refinancing. Poloncarz said the borrowing arrangement is nearly identical to the Terrace View Long-Term Care Facility borrowing deal adopted under the Chris Collins administration in 2011, which the Legislature unanimously supported.

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