Nassau County to Sue NIFA for Financial Takeover

Ronald Stack, chairman of the Nassau Interim Finance Authority, left, speaks to the media during a public meeting in Uniondale, N.Y., Wednesday, Jan. 26, 2011. The authority voted unanimously to take control of the county's finances after it determined that Nassau will most likely run a deficit of more that 1 percent. The decision could eventually lead to a wage freeze for thousands of county employees. (AP Photo/Seth Wenig)

A fiscal watchdog agency, citing a potential $176 million gap in Nassau County’s 2011 budget, took control over the county’s finances Wednesday—a move Nassau County Executive Ed Mangano vowed to fight in court.

The six-member Nassau Interim Finance Authority (NIFA) voted unanimously to enact a so-called control period, sparking a war of words with the Republican county executive and GOP-led Nassau County Legislature, both only in charge for one year, while Democrats urged Mangano to work with the panel. The takeover set off a whirlwind second only to the snow storm outside the Long Island Marriot, where the panel convened.

“It’s important that interested parties not focus on the takeover itself, but on the steps necessary to restore fiscal stability to Nassau County,” New York State Comptroller Tom DiNapoli, a former Democratic Assemblyman from Great Neck, said in a statement. “Protracted litigation will only delay the inevitable hard choices that must be made to put Nassau back on solid fiscal ground.”

But Mangano, who has until Feb. 15 to submit a revised budget, wasted no time picking a fight.

“We believe it premature, unfounded and unnecessary and we will take legal action,” Mangano told reporters during a press briefing at his Mineola office shortly after the vote, while insisting the $2.6 billion budget is balanced. He and Presiding Officer Peter Schmitt (R-Massapequa) suggested the board is politically motivated with the intention of forcing Republicans to increase property taxes in an election year—despite their vow not to raise taxes.

From left: Peter Schmitt (R-Massapequa), presiding officer of the Nassau County Legislature, County Executive Ed Mangano and County Comptroller George Maragos at a press briefing in Mineola to announce plans to sue NIFA for taking over the county's troubled finances Wednesday.

NIFA Chairman Ronald Stack, who was hoping the county wouldn’t sue, said the panel is only acting on its legal authority to step in whenever it finds a risk of a 1-percent deficit in the budget, or $26 million—a bar he said has been reached six times over.

“On this board are three registered Democrats, a registered Conservative, a registered Republican and an independent,” Stack said. “And it voted unanimously. It is not partisan, it is not political.”

Union leaders expressed relief that NIFA did not go a step further and declare a fiscal emergency, a move that would give the panel the authority to disregard contracts and freeze wages.

“You have a lot of nervous people out there,” said Jerry Laricchiuta, president of the 12,000-member Nassau County Civil Service Employees Association (CSEA) Local 830, the county’s largest union.

Laricchiuta and Magano had reached a tentative agreement Tuesday for $2 million in concessions this year in an unsuccessful attempt to stave off the NIFA takeover. Laricchiuta said the offer needs approval of his membership but is still on the table.

Not all county unions were so quick to renegotiate.

“They have to sit down and make some hard decisions along with Peter Schmitt and come up with some recurring sources of revenue,” said Gary Learned, president of Nassau County Police Superior Officers Association, which represents police ranked sergeant through assistant chief. “If they expect unions to do something unpleasant, they’re going to have to do something that may be deemed unpleasant also.”

Ever-increasing payroll costs are only part of the problems facing the county. NIFA was established a decade ago when the county was run nearly bankrupt under former County Executive Tom Gulotta, a Republican.

Chief among faulty finance practices that began back then and continue today is the county’s borrowing to pay settlements resulting from real estate tax assessment challenges, the majority of which are successful because the system is so flawed. That problem continued under former County Executive Tom Suozzi’s eight-year tenure as well.

Mangano said his plan to fix the long-standing problem with the broken tax assessment system will take two years to take effect, adding that he is concerned NIFA’s recent decision could complicate that goal if the takeover results in another downgrading of the county’s bond rating. If bond rating agencies are skeptical of NIFA’s move, it could become costlier for the county to continue borrowing money.

“When you create doubt in the mind of investors, when you create doubt in the mind of bond holders and rating agencies, you cost Nassau taxpayers dollars,” Magano said.

Before the county executive has a chance to have his case hear in a court of law, Schmitt is planning to try the NIFA board in the court of public opinion.

Schmitt, who called NIFA “ethically challenged” and described the takeover as “nothing more than a coup,” is planning a news conference to detail his grievances against NIFA board members. The news conference, originally scheduled for Thursday morning, was postponed due to the snow.

“I love a good fight,” he said. “These people are full of it and they’re wrong and I’m just going to enjoy hitting them on the side of the head with a baseball bat. And that’s what we’re going to do tomorrow because this is outrageous. This is a run-away board.”

With Spencer Rumsey