NUMBERS DON’T LIE
NIFA’s control resolution, in which NIFA declares and justifies its decision to invoke the control period, reads like any dry legal document, with dozens of “resolved”s and “whereas”s, but as it recounts its relationship with the county executive’s office in a measured, reasonable tone, it depicts the harrowing track leading to the unprecedented action.
Go back to Sept. 28, 2010, when NIFA concluded in its preliminary review that Mangano’s proposed 2011 budget “did not meet the standards necessary to project budget balance because of the degree of risk in various projected revenue sources and cost savings.” At a subsequent public meeting the NIFA board said that the budget was “not balanced,” that certain projected revenues and costs were “unduly risky” and “warned that the County was on the edge of a fiscal abyss.”
What stands out is NIFA’s observation the county would stop using its “operating revenues to fund its tax certiorari obligations and instead proposed bonding of an additional $364 million over the next two years, including $100 million in Fiscal Year 2011”—these being the bonding changes requiring the approval of a supermajority of the county legislature, which the Mangano administration contends, would be the last time the county would need to seek to borrow such a sum. This is due to Mangano’s freezing of the tax assessment rolls for four years and his elimination of the aforementioned “County Guarantee.”
Now that “supermajority” requirement is being flung at Minority Leader Yatauro by Republicans who say she broke her promise to support their need for more borrowing to pay the property tax reassessment rewards. Not so, say her supporters. She never promised the Republicans a “blank check” to borrow more money. Yatauro tells the Press she had agreed with Mangano to have her members consider additional borrowing to settle any property tax assessment appeals on a case-by-case basis if the county no longer had the funds available.
“Despite his strong urging that I do so, I never agreed to any specific amount of borrowing,” she insists. “Borrowing in my opinion should only be used as a last resort, not as a first option.”
When Suozzi was county executive, the NIFA board had raised objections to his borrowing to pay for the tax assessment settlements, but the practice has taken off under his successor. “Here’s the difference,” explained a NIFA board member who asked to remain anonymous. “Mangano didn’t want to pay anything. He wanted to borrow all of it.
The sheer dollar amount is gigantic, and that’s the challenge.”
Former Nassau Comptroller Howard Weitzman, a Democrat, says that Mangano’s shift is “a major sore point with NIFA.
The county has switched from borrowing 50 percent of the liability. Now we’re back to the Gulotta days of borrowing 100 percent of the liability.”
Gulotta’s excessive borrowing drove the bond-rating agencies to downgrade the county to nearly junk bond status.
NIFA was created to give the county access to the bond markets, and its credit-rating was much better than the county’s because it handled all the sales tax revenue so the bond holders could have confidence they’d get paid.
As a lawyer with fiduciary experience monitoring the county’s finances put it, “the only thing the bond rating agencies give a shit about is that the bond holders are paid. They don’t care if you start tearing down the buildings and burning the wood to heat the county!”
“The bond rating agencies’ opinion of the county is very important,” says Weitzman. He describes a Nov. 4, 2010 report from Moody’s, in which Nassau’s bond rating status was downgraded, as “a very scary document.” All three major credit agencies are “following the action” by NIFA, Weitzman says, because of the fear of defaults.
“Nassau County is definitely on the front burner nationally,” he says, “because lenders are very nervous about municipalities as it stands right now, and they’re watching them closely.”
Flip the calendar to Dec. 29, 2010, when Mangano gave NIFA a letter that listed “$157.9 million in new contingencies allegedly available in 2011, but unmentioned by the County in its enacted budget or in earlier meetings with NIFA and NIFA’s staff,” as NIFA described the proposal in their resolution. To the board it meant that the county executive had just conjured up almost $158 million in savings that may never materialize.
The next day, the NIFA board got to hear from an uninvited, though welcome, guest: the county executive himself. In a humble, deferential tone, Mangano said that he would call on the board to step in if he deemed it necessary in the future but that there was “no need to have a control period” at this time because the 2011 budget was balanced. In the holiday spirit, perhaps, the board granted the county executive a few more weeks to “alleviate the strong sense of the Directors that a statutory operating deficit was substantially likely and imminent.”
The Jan. 20 deadline came, the administration weighed in, and six days later NIFA voted 6-0 to impose the control period. Going forward, NIFA could veto county contracts and have a say on the county’s short- and long-term borrowing. If NIFA had taken the more drastic step of declaring a fiscal emergency, then it could have frozen public employees’ salaries.