New York State Comptroller Edward V. Regan said Friday that the Rensselaer county executive's office has chosen not to finance a budget deficit through the sale and leaseback of a county-owned nursing home after officials in his office warned against the deal.
Regan, however, did not say a new deficit-reduction plan announced on Tuesday by Rensselaer County Executive John L. Buono fell afoul of the policy the comptroller's office has set forward for deficit financing.
This policy. stated publicly by the comptroller after Troy, N.Y.'s $35 million sale and leaseback transaction, opposes the use of lease deals to cover budget deficits.
In an interview after the Bond Buyer's Municipal Finance Conference on Friday, Regan said Rensselaer County officials "are not going to do it. "
"The county executive said they would not do it if we don't like it, and we don't like it. He's a wise man," he said.
Regan said his office will release a statement on the Troy deal sometime next month. This statement will combine both policy and an interpretation of municipal law, he added.
Since the Troy deal in May, the comptroller's division of municipal affairs has mounted a campaign warning municipalities against the sale and leaseback technique to cover budget deficits.
With municipal budgets across the state squeezed by a stiff regional recession, sources say the comptroller's office believes many more cities and counties may use the sale and leaseback technique for deficit reduction purposes. Unlike GO sales, sale and leaseback deals do not require state legislative approval. These transactions also cost the municipality more than the sale of general obligation bonds.
In the interview, the comptroller said he believes 30 municipalities will ask for legislative approval to issue deficit bonds. During the last legislative session, lawmakers gave approval to 10 municipalities to issue deficit bonds, a level Regan described as "unprecedented."
Officials in the comptroller's office also say the general municipal law does not give municipalities the authority to use installment purchase contracts, such as the lease and sale back of government-owned buildings to cover budget deficits.
Since September, Rensselaer County officials have debated a sale and leaseback of the county-owned Van Rensselaer Manor Nursing Home in an attempt to cover a $9 million accumulated deficit the county projects through the 1993 fiscal year, which ends Dec. 31, 1993. In recent weeks, the county executive's office appeared close to approving the plan, which it said would be different than the Troy transaction.
In broad terms, the county would sell the nursing home to a group of investors and then lease back the facility. The transaction is completed through the issuance of certificates of participation or lease revenue bonds to obtain tax-exempt status.
In presenting his $129.3 million 1993 budget, Buono disclosed a deficit-reduction plan that calls for the outright sale of the nursing home to an independent third party. The county would lease the nursing home from the purchaser until a new facility is completed.
The new facility would cost an estimated $35 million and would be financed through the state Medical Care Facilities Finance Agency. The agency would cover 90% of the capital improvements through Medicaid reimbursements, said Donald H. Evans, a senior manager of KPMG Peat Marwick, an accounting firm that is preparing a state-mandated certificate of need for the construction.
Jack Madden, assistant to the county executive, acknowledged that the views of the comptroller's office played a major role in Buono's decision not to use the sale and leaseback technique. Madden said the plan, as well as the county executive's budget, must be approved by the 19-member county legislature.
It is difficult to determine if the budget and the deficit plan will win the support of the county legislature. Buono, a Republican, opposes a sales tax increase. That increase is supported by many Democrats in the legislature, including its chairwoman, Marilyn K. Douglas.