Modified: June 24, 2020 3:18pm
Created: June 24, 2020 10:39am
Better rate than New York State indicator of strong financial position
(ERIE COUNTY, NY) – Erie County Comptroller Stefan I. Mychajliw Jr. announced today that Erie County is issuing a Revenue Anticipation Note (RAN) with a closing date scheduled for June 25, 2020. The RAN is for $125 million. It will assist Erie County in addressing financial shortfalls as a result of both COVID-19 and state and federal revenue due Erie County. This borrowing instrument allows the county to borrow in the short term, with future anticipated revenue to be used to pay it off quickly.
“We did not need to engage in short term borrowing last year because of our strong position financially,” said Comptroller Mychajliw. “Because we were in a sound financial position when the Coronavirus crisis hit, we were able to soften the damage of the collapse of the economy. We are not out of the woods just yet. But since Erie County was in such a good place with sales tax collections prior to the pandemic, it has helped us to weather the storm of COVID-19.”
Erie County has received $160 million from the federal government as part of the CARES Act. However, that money can only go to COVID related expenses that were not previously budgeted for. Issuance of the RAN will allow Erie County to address some of the immediate challenges and budget shortfalls that are a result of the economy shutting down for several months .
Erie County had anticipated sales tax collections of $491 million for fiscal year 2020. Those figures were factored into this year’s spending plan.
“No one could have anticipated a worldwide pandemic,” said Comptroller Mychajliw. “It created a deficit, which meant some tough decisions have to be made.”
Erie County went to the market for RAN issuance one week after New York State, and the Office of Erie County Comptroller was able to secure a better interest rate than the state. Erie County was able to borrow at a rate lower than the State of New York, despite the State’s higher credit rating.
“I’m proud to engage in this borrowing at one of the lowest possible costs to the taxpayer. That is an indication of our strong financial position prior to COVID-19. We are also in a position to pay” said Comptroller Mychajliw. “It’s one of the reasons I felt it important to declare a deficit when we did. The Office of Erie County Comptroller worked collaboratively with all partners in government. Together we created a county plan to address the financial shortfall. That better prepared us to go to Wall Street and get a good rate for taxpayers.”
Erie County is issuing the RAN in anticipation of collection and receipt of revenue due the County from the State and Federal government from programs like social services and health aid. Once those funds are received they are to be set aside for repayment of the Revenue Anticipation Note.
Historically Erie County issues the RAN because of the difference between when bills come due and when revenue comes in. The Erie County Comptroller’s Office did not do so last year because of a strong economy and higher sales tax revenue. Circumstances have changed considerably this year as a result of the fiscal impacts from COVID-19.
While FEMA reimbursements and CARES Act funding will likely cover COVID expenses, there is still the loss in revenue budgeted for in 2020 that was expected from sales tax revenue to pay for various programs, services, and projects that Erie County provides that needs to be addressed.
Erie County government benefits from strong financial management, which historically has contributed to consistent and stable budget performances.
The Revenue Anticipation Note will also allow Erie County to begin some infrastructure and capital project improvements this year.
“We should take advantage of the marketplace and engage in bond sales soon to get those projects funded,” said Mychajliw. “There is a lot of infrastructure work that needs to be done. Getting those projects started will also help re-start the economy.”
“I expect going forward the Administration and the Erie County Legislature will manage salary and benefit costs in their departments and offices and will budget conservatively for sales tax revenue going forward, along with adhering to the deficit plan recently passed by legislators. We will continue to monitor budgetary issues, the volatility in certain areas, including budgeted expenses associated with ECMC, and the larger than historical use of fund balance,” concluded Comptroller Mychajliw.
For PDF of letter, click HERE