DiNapoli urges alerts for municipal fiscal distress

State Comptroller Thomas DiNapoli says his early warning

State Comptroller Thomas DiNapoli says his early warning proposal would give financially struggling municipalities time to discuss stress options. (March 14, 2012) Photo Credit: Newsday / Audrey C. Tiernan

advertisement | advertise on newsday

A financial early-warning system proposed Monday by State Comptroller Thomas DiNapoli would seek to alert officials and taxpayers when municipalities slide toward fiscal problems.

Reception to the proposal was mixed, as some officials expressed concern the system would duplicate existing analysis by ratings agencies.

Since the recession, cities and towns across the country have struggled with lower tax revenues and higher social services and pension costs. Those problems have led in some cases to debt-ratings downgrades, which can increase borrowing costs, and state interventions, such as the Nassau Interim Finance Authority, which currently has veto power over the county's fiscal plans.

The proposed system, which could be implemented after a 60-day comment period, would use budget, financial and census information to classify local governments and school boards according to their level of fiscal stress.

Municipalities would be classified along a four-step scale ranging from "not in fiscal stress" to "significant fiscal stress." Indicators like poverty, unemployment and changes in property values would also be weighed.

DiNapoli said in a news release that the system would "give local officials and the public sufficient time to discuss options for turning things around."

Richard Tortora, president of Capital Markets Advisors in Great Neck, a financial advisory company, said he's had municipal clients who were surprised by fiscal problems. A state warning system, he said, could alert residents and officials about "the severity of the problem maybe a little bit sooner."

Some local officials say the system wouldn't tell them anything they don't already know.

"We're under great pressure to balance the budget," said Jeff Nogid, comptroller of Long Beach, which is struggling to control a deficit. "More monitoring doesn't solve anything."

Nassau County Comptroller George Maragos called the system unnecessary and bureaucratic: "The rating agencies already do this."

Jennifer Freeman, a DiNapoli representative, said the proposed system could alert residents to fiscal risks: "Most local residents aren't following what [rating agencies] have said about their community."

The latest LI business news in your inbox daily. Get the Biz Briefing newsletter!


Newsday.com now uses Facebook for our comment boards. Please read our guidelines and connect your Facebook account to comment.

You also may be interested in: