Mangano turns to tea party no-no: borrowing

Nassau County Executive Edward Mangano at Great Neck, Nassau County Executive Edward Mangano at Great Neck, NY. (March 15, 2012) Photo Credit: Howard Schnapp

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From Congress to governors' mansions to the presidential campaigns, immediate and severe debt reduction has become GOP and tea party dogma on par with tax cuts.

In Nassau County, however, Republicans are taking a far different tack.

Republican County Executive Edward Mangano, elected on a tea party wave in 2009, has proposed $850 million in new borrowing in the past year for everything from a new hockey arena to tax settlement payments.

Mangano contends that borrowing in the near term is the only way to deal with Nassau's deep budget problems without raising property taxes -- and that his plan will end the decades-long practice of borrowing for tax refunds by 2015.

"We are absolutely in line with tea party principles because we are ending borrowing without adding new taxes to our residents," Mangano said.

Outside experts say Mangano is making a practical choice -- addressing what he sees as the desires of his political supporters rather than following national Republican policy. Mangano is betting that his constituents would prefer borrowing to harsher measures, such as raising taxes, according to experts.

Mangano "is making a decision that higher debt is better than higher taxes," said Lawrence Levy, executive dean at the National Center for Suburban Studies at Hofstra University. "And that is a political decision and not a fiscal decision."

 

Wishes of political base

Political strategist Michael Dawidziak argues that Mangano, like lawmakers of both parties, must adhere to the wishes of his political base. For local Republicans, that means holding the line on property taxes and turning to borrowing for fiscal relief, he said.

"The county executive needs to figure out how to make up for so many years of fiscal irresponsibility with very little wiggle room and with [a state control board] breathing down his neck," said Dawidziak, who works mostly for Republicans.

Since taking office, Mangano has issued a total of $651 million in long-term bonds, including $207 million in bonds that were sold this week.

Democrats are leading the opposition to the practice, preaching fiscal conservatism and a reduced reliance on borrowing to solve the county's fiscal crisis.

They say sounder fiscal policy would be to pay half of the refunds from the county's operating budget -- as Mangano predecessor Thomas Suozzi did from 2006 to 2009. From 2002 to 2005, Suozzi borrowed heavily for tax refunds.

Democrats have so far refused to vote for tax refunds. A vote on borrowing roughly $140 million in tax refunds is set tentatively for May 7.

"Borrowing should never be the first resort," said legislative Minority Leader Kevan Abrahams (D-Freeport). "But with Mangano and the Republicans, it's always the first resort."

Some conservatives also criticize the borrowing.

 

'It's all a shell game'

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Tea party advocate Frank Seabrook said Mangano should slash the size of government and pay tax refunds from the county's operating budget.

"It's all a shell game," said Seabrook, of Wading River, who runs the tea party newsletter New York Liberty Report. "Money gets shifted all around the table. But nothing ever comes off the table. Either way, the taxpayer foots the bill."

But Garden City attorney and political consultant Brad Gerstman said municipal officials like Mangano are not held to the same level of ideological purity as national lawmakers. "The closer you get to local government, the less strict it becomes," said Gerstman, who represents both Republicans and Democrats.

Mangano ran for county executive on the Republican and Tax Revolt party lines, pledging to repeal the home energy tax and to not raise property taxes. He's stuck to that promise, contending that Nassau families already are burdened by some of the nation's highest property taxes.

A sharp decline in sales taxes, fueled by a stagnant economy, combined with rising health care, pension and labor costs, deepened Nassau's financial hole. Last year, the Nassau Interim Finance Authority, a state monitoring board, took over the county's finances.

 

Borrowing to pay refunds

Fueling the deficit and much of the fiscal instability is Nassau's error-ridden tax assessment system. For decades, dating back to former County Executive Thomas Gulotta, a Republican, Nassau has borrowed tens of millions of dollars a year to pay refunds to businesses and homeowners who successfully grieved their property taxes. The practice continued under Suozzi and Mangano.

The state comptroller's office pegs Nassau's total debt as the highest of any county in the state. The county's long-term debt exceeds $3 billion, Mangano's office said.

Suffolk County's total long-term debt is $1.35 billion.

Mangano issued $362 million in bonds in 2010, said county Comptroller George Maragos. New borrowing in Nassau dropped to $82 million in 2011 after NIFA and the county legislature blocked or shaved millions of dollars in bonding.

The county bonded an average of $101.5 million annually for tax refunds from 2000 through 2010 and cannot stay on that path, Mangano said.

"The taxpayers can't afford to pay for all of their mistakes in one year," said Mangano, arguing that most of the refunds stems from Suozzi's time as county executive. "You can't punish the taxpayers for the prior administration."

The $850 million in borrowing Mangano requested since last Aug. 1 consisted of $400 million to build a new Nassau Coliseum -- a measure voters rejected -- and up to $450 million for refunds, court judgments and payouts to retirees who left in a wave of buyouts aimed at reducing the county's multimillion dollar budget deficit. NIFA has approved only a portion of those funds.

 

Mangano says fixes made

Mangano contends a new Coliseum would have produced recurring revenue and that capital spending dropped over the past two years. Nassau plans to cut bonding for court judgments and unlike Suffolk will not borrow to cover pension increases, he said.

Mangano claims to have fixed some of the most vexing problems in Nassau's property tax refund system. He froze assessments for four years, implemented a settlement program and ended a guarantee requiring Nassau to pay refunds for school districts and towns.

The last item on the to-do list, he said, is to borrow $305 million over three years to settle outstanding tax refunds.

Maragos, a Republican, said Mangano's plan will work.

"To reach a balance you need to bite the bullet and deal with it," he said. "We should not burden current revenue streams to pay for debt that has accumulated for years."

But NIFA board member George Marlin said, "At the end of the day, balancing a budget with bonded debt merely passes off a tax increase when a given politician leaves office. It's a tax increase on one's children and grandchildren."

With Celeste Hadrick

 

NASSAU COUNTY BORROWING

Total outstanding debt: $3.07 billion

Total debt for tax refunds: $1.2 billion

Total debt for capital projects, judgments and termination pay: about $1.8 billion

Total debt service for 2012: $370 million

Debt service payments in 2012 for tax certs: $150 million

Debt service in 2012 for capital projects, termination pay and court judgments: $220 million

Source: Nassau County

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