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Nassau’s Balancing Act

Constructed of one-shots, borrowed funds and deferred costs, Nassau’s fiscal future is destined to collapse

Under A Microscope

NIFA is empowered to review, monitor compliance and make recommendations on the county’s financial plan. It issues bonds and notes for various county purposes, such as the restructuring of outstanding debt.

The agency is also authorized to declare a “control period,” or a temporary NIFA takeover of the county’s finances, if the county incurs an operating funds deficit of 1 percent or more during a fiscal year, among other thresholds.


Its May 28, 2009 analysis, titled “Review of the May 1, 2009 Nassau County Multi-Year Financial Plan Update and Related Matters,” highlighted the administration’s heavy reliance on one-time quick fixes, bonds and wishful solutions to close a projected $130 million budget gap for FY 2009—some of the very same practices the agency was created to end. It criticized the Suozzi administration’s lack of long-term planning and depletion of $217 million in critical emergency reserves, which were spent during “good times” rather than saved for periods of crisis, such as the current economic downturn.

“The idea is they’re there for a rainy day,” says Naughton.

Stokes admits the reserves were spent during “good times,” but defended its drawing down as a necessary means of continuing the fiscal cleanup required following the previous administration from nearly a decade ago.

In addition, the report reiterated a previous discovery by NIFA that a $2.1 million “operating surplus” reported by the county for fiscal year 2008 included a significant amount of non-recurring revenues and bond proceeds as operating income—contributing to a “large and growing structural deficit.” A structural deficit is the difference between recurring revenues and expenditures. NIFA described these actions as “troubling.”

The county’s FY 2009 budget plans were approved by NIFA conditionally—only after requiring Suozzi to submit a detailed Contingency Plan and Update to address identifiable risks and prepare for the current economic crisis.

Source: Nassau County Office of the Comptroller, “Comptroller's comments on the  proposed Nassau County 2010 budget and multi-year financial plan,” Oct. 2, 2009

Source: Nassau County Office of the Comptroller, “Comptroller's comments on the proposed Nassau County 2010 budget and multi-year financial plan,” Oct. 2, 2009

Its latest report, “Proposed Multi-Year Financial Plan 2010-2013,” uses less dramatic language but paints an equally foreboding outlook for Nassau’s fiscal future, with everything beginning to hit the fan in 2011.

The 60-page analysis continues past criticisms, raising many of its previous red flags regarding the administration’s handling of county taxpayers’ finances—stressing its lack of planning for their future and reliance on short-term budgeting strategies. The Press has learned the report almost didn’t make it into the hands of county legislators who will be voting on Suozzi’s FY 2010 budget plans Oct. 19 due to an internal move to postpone its release until after the vote.

The county uses more than $220 million in non-recurring revenues in FY 2009, according to the report. The report documents a $170 million structural deficit in fiscal year 2009. (See chart.)

“This means that the estimated structural deficit in FY 2009 is even greater than it was in FY 2001; however, it is noteworthy that the County has projected a smaller structural deficit in FY 2010,” writes NIFA.

NIFA is also skeptical about the administration’s banking on yet-to-be-created revenue streams that require state and/or county legislative approval. According to an Oct. 5, 2009 analysis by Naughton’s office, these plans include new taxes and other initiatives: a $1.50 per pack cigarette tax; a water tax based on consumption; a $50 ticket surcharge for traffic infractions on the Long Island Expressway; and the installation of video lottery terminals at Belmont Raceway, among others.

Stokes says the administration remains “very optimistic” the cigarette tax will soon become a reality.

A spokeswoman for NYS Assembly Speaker Sheldon Silver (D-Manhattan) tells the Press there are currently no plans to reconvene and declined to comment on pending pieces of legislation.

County taxpayers have already been hit this year with new taxes. Although the county executive has been publicly touting his dropping of a planned 3.9 percent property tax increase from the FY 2010 budget in his re-election ads, the Press has confirmed with NIFA that Suozzi’s already implemented 2.5 percent residential energy tax—which is projected to rake in about $39 million next year—is the equivalent of a 4.9 percent hike in property taxes.

Word Games

With a structural deficit including non-recurring revenues of $220 million this year and projected gaps exceeding $100 million-and-climbing into the foreseeable future, math would dictate that the county would already be in NIFA’s “control period,” since 1 percent of its $2.6 billion budget is $26 million.

Not so fast, say those within the agency. According to several members, who spoke on the condition of anonymity, it all boils down to a question of what would be counted as part of a deficit in that equation and who was crunching the numbers.

Naughton agrees.

“It becomes a question of what you put into the widget machine and then who you have interpret it,” explains one. “It all depends on what pencil neck you get looking at the numbers.”

Ultimately, the NIFA sources explain, it would likely come down to a “duel between accountants,” with the county’s financial experts interpreting the figures as one way and NIFA’s experts another.

Stokes argues that every municipality in the country operates under a deficit. The county can maintain a true “surplus” regardless of the size of structural deficit, he explains, because they’re two different entities.

In a “control period,” NIFA would seize command of the county’s finances, with the ability to: approve/disapprove proposed county contracts and borrowings; approve/disapprove/modify its financial plan; issue binding orders to local officials; and impose a wage freeze, among other powers.

Neither side is ready or willing to pull the trigger just yet, though it would be the authority of NIFA’s board of directors to do so. Such a move would affect the county’s standing with credit rating agencies and result in more financial bloodshed for taxpayers. Despite its underlying wealth, Nassau remains an outlier, NIFA says, rated well below almost every other comparable county in the nation.

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