In Washington-Style Display of Political Gamesmanship, GOP Legislators’ Refusal to Compromise Could Cost County Hundreds of Thousands in Interest Penalties and Put Risk Retention Fund in Jeopardy

Erie County, NY— Today, County Executive Mark C. Poloncarz blasted the Erie County (“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 5^th deadline,” said Poloncarz.  “It is time to put petty politics aside and do what is in their constituent’s best interests before it is too late.”

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.”

Background Information

In December, the Collins administration agreed to settle a personal-injury lawsuit that alleged the County failed to properly train or supervise lifeguards working at a West Side Buffalo pool in August 2009 when Jannette Morales, then 37, nearly drowned. An agreement was reached by former-County Executive Chris Collins and then-County Comptroller Mark Poloncarz (and endorsed by the Erie County Fiscal Stability Authority) to borrow $7 million to pay for the lawsuit through a judgment bond.  However, because this agreement was not reached until after the end of the 2011 Legislative Session, the matter was held for consideration until the following year. 

The new downsized Legislature consists of six Democrats, four Republicans and one Independent who caucuses with the Republicans.  Bond Authorizations require a two-thirds majority (or eight votes) meaning two votes from the Republican caucus were needed for passage.