County Legislature Approves ECMC Financing
By Joyce Kryszak
Buffalo, NY – The Erie County Medical Center got the legislative backing it needs to finalize its transition to a public benefit agency. The Erie County Legislature Wednesday approved a measure that guarantees a $106 million loan for ECMC. But the authorization came only after some tense arguments about the complicated financing plan.
The hospital's growing debt and reliance on county funding made structuring it as a Public Benefit Agency difficult. But last year, lawmakers finally hammered out a deal. It included a cash advance from ECMC -- to be paid to the county -- buying out the hospital's assets. Wednesday, the Legislature agreed to guarantee the loan needed to make the payment.
Buffalo Democrat Al DeBenedetti says that's completely illogical.
"We're paying for it, we're going to pay the interest, we're committing to pay the debt service, we're committing to pay the principal and interest," said DeBenedetti. "This is the craziest transaction you can imagine."
The reason for the complicated financing plan is the tight cash flow built into the 2004 budget. The budget, approved by lawmakers in November, relies on the $85 million from the ECMC transfer. So the county will borrow the money for ECMC, pay itself the money -- and then pay back the loan. The idea is to allow the hospital to start out debt free. Michael Ranzenhofer, who was appointed Minority Leader Wednesday, says similar deals were structured in Nassau and Westchester counties.
"They did the exact same type of bond transaction, but the difference from theirs to ours, is that ours is paying off a lot of debt," said Ranzenhofer. "And that was the key to this transaction."
But DeBenedetti, as well as many other legislators, believed the same thing could have been accomplished by simply waiving the advance payment. That would have saved an estimated $4.5 million in interest and finance charges. But according to the County Comptroller, without showing the payment as a revenue, the county is in danger of having its bond rating downgraded. Republican Barry Weinstein says it was the best choice they were given.
"I really didn't say this was a good move for Erie County," said Weinstein. "If I had to do the financing, I would have done it differently. But I deferred to the comptroller and the financial management people."
The Legislature is expected to soon complete the deal with a separate resolution authorizing the county to pay off the $106 million loan.