Nassau scores with the mother of all one-shots
NIFA chairman Adam Barsky during a meeting in Uniondale on Oct. 15, 2019. Credit: Newsday / Steve Pfost
By Joye Brownjoye.brown@newsday.comNassau County bonds were popular in the Wall Street municipal market one day two weeks back.
Crazy popular.
As in, some $1.1 billion in offerings -- snapped up in 90 minutes.
As in, four times more potential buyers than there were offerings wanting in on the action.
Hot cakes should do so well.
The market frenzy ended a quest by Nassau and the Nassau Interim Finance Authority to stabilize county finances enough to get through a pandemic-induced drought in sales tax revenue.
It was the largest combined bond-restructuring offering in county and NIFA history, equal to about one-third of Nassau's annual budget.
And that restructuring -- which added no additional borrowing to either NIFA or Nassau's obligations -- in turn, generated $435 million in savings.
It amounts to the largest one-shot revenue in Nassau's history.
"It is a historic one-shot, in response to the economic fallout from a historic pandemic," Adam Barsky, chairman of NIFA, a state oversight board that controls Nassau County's finances, said Friday.
Without NIFA's restructuring, Nassau would be headed into a mountain of obligations to repay existing debt -- at a time when sales tax revenue, which accounts for more than 40% of county income, was down.
In short, it would mean big bills -- and little ability to pay them.
With a sustained loss of sales tax revenue, the county could have to hike taxes by some 60% (which, politically, never would happen), lose 40% of its workforce (also a political dead end) or some combination of the two, according to NIFA calculations,
With the restructuring, however -- boom! -- Nassau now has the ability to put that $435 million toward operating expenses rather than paying off debt.
Another bonus: A mountain of debt has been leveled off, with repayment over a 15-year period.
Yes, there is interest due on that borrowing.
But the market frenzy ended up helping Nassau by driving interest rates down to some 1.3%. "That probably will end up being lower than the rate of inflation over the next few years," Barsky said.
Either way, Barsky said, the new cost is $150 million less than Nassau County would have had to pay without the restructuring.
OK, but what about Republican lawmakers' concerns that the longer term borrowing would keep the control board in place longer than elected officials want.
That's taken care of in an agreement between Laura Curran, Nassau's Democratic county executive, Legis. Richard Nicolello, who heads the legislature's Republican majority, and NIFA.
If down the line Nassau wanted to tell NIFA, hey, we want to handle our own debt, the county can take that route -- though that would be a stunner since NIFA's been around for two decades.
Politically, the restructuring also is a godsend for Curran and lawmakers, who are up for reelection this year.
The cushion, along with an expected three years of budget surpluses, should make it unnecessary to even talk about Nassau's third rail in politics: Tax increases.
Even in good times, tax hikes would generate wrath. With businesses and residents dealing with the worst economic upheaval in this young century, however, such a move could have off as cruel.
But isn't Nassau, like every other financially ailing municipality, waiting and hoping for more federal pandemic aid?
The agreement between NIFA, lawmakers and Curran anticipates that too, with the creation of something new:
A "Special Revenue Fund."
Any aid money from Washington would be parked there, Barsky said.
And if Nassau needed money for pandemic-related expenses, payment of property tax refunds or to begin a capital project, the county executive could request money from the fund.
But any expenditure would have to be approved by the county legislature.
Even then, Nassau still would have work to do.
"The pandemic has forced Nassau to work in new ways, it's forced use of technology," Barsky said. "Like everything else, the pandemic will change the way the county works."
Joye Brown has been a columnist for Newsday since 2006. She joined the newspaper in 1983 and has worked as a reporter, an editor, newsroom administrator and editorial writer.
