Constitutionality of NIFA takeover upheld

Supreme Court Justice Arthur Diamond. (Aug. 15, 2008)

Supreme Court Justice Arthur Diamond. (Aug. 15, 2008) (Credit: Bruce Gilbert, 2008)

A judge Monday denied Nassau's efforts to block a takeover of its finances, upholding the constitutionality of a state watchdog and allowing it to move ahead with a control period.

In his ruling, State Supreme Court Justice Arthur Diamond upheld the right of the Nassau Interim Finance Authority to impose financial controls on the county.

"In this court's view, a balancing of the equities tips decidedly in favor of NIFA," Diamond wrote. "To prevent it from exercising the powers it has been entrusted with . . . would essentially render it powerless."

But he put off a decision on whether the takeover was "arbitrary and capricious" -- the final argument made by County Executive Edward Mangano in a lawsuit against a takeover. Diamond wrote that the county hadn't yet proved its case, and that NIFA's move "does not appear to be arbitrary and capricious."

Diamond directed the county to submit arguments on that claim by March 29. He ordered NIFA to answer by April 18.

Although County Executive Edward Mangano and Comptroller George Maragos maintain this year's $2.6-billion budget is balanced, NIFA found a $176-million deficit -- nearly seven times greater than the 1 percent gap that triggers a takeover.

Mangano sued after the six-member NIFA board voted unanimously in January to impose a control period on the county's finances.

In a statement Monday, NIFA said it was "pleased that the court denied the county's request to enjoin the control period, which is now in effect. We look forward to the county's delivery of a revised financial plan within five business days. We are confident that we will prevail on the remaining issues if the county decides to continue with this litigation."

NIFA added that Mangano and the elected officials remain in charge of Nassau, and emphatically denied Mangano's oft-repeated assertion that NIFA wants to raise property taxes. "NIFA cannot and will not increase taxes," the agency said.

Yet Mangano raised the specter again yesterday, saying in a statement, "I call upon NIFA to lay politics aside and provide suggestions to fix our County's finances without raising property taxes."

He also called for NIFA and labor leaders to come to a "summit" next week to achieve voluntary contractual concessions.

Maragos declined to comment.

In claiming NIFA acted arbitrarily, Mangano argued that NIFA had allowed former County Executive Thomas Suozzi to use budgeting tactics that NIFA was now preventing. In particular, Mangano said the watchdog had allowed Suozzi to count as revenue money borrowed to pay property tax refunds, while criticizing Mangano for doing the same thing.

In his decision, Diamond said the court "is not insensitive to the fact that NIFA's review appears to have become more stringent this year in comparison to the past. It is clear that some of the county's budgeting practices, which NIFA previously allowed to one extent or another and on which the county clearly relied in drafting its budget were not permitted this year.

"Nevertheless, NIFA's determination appears to be supported by the record and the divergent methods employed here have been justified by both the present facts as well as NIFA's reasoning."

Meanwhile, Mangano made public a letter he sent to NIFA chairman Ronald Stack, asking for a meeting Wednesday morning. "Could you and your staff please come prepared to discuss appropriate initiatives that may be included in a revised financial plan," he wrote.

In his reply, Stack suggested a meeting this afternoon.

With Sid Cassese

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