Several members of a state fiscal control board Monday denounced a plan by Nassau County to allow a private investor to buy $20 million in debt from residential tax protest firms that won property tax refunds last year.
Under the plan, the private investor would pay some 18,000 homeowners who have been waiting a year for their tax refunds, while the county would pay back the investor over time from operating revenue.
Democrats have blocked county borrowing to pay tax refunds in a dispute over an unrelated redistricting proposal.
Three members of the Nassau Interim Finance Authority, a state panel that controls the county's finances, Monday called the deal another form of borrowing. The board has six members, five of whom attended Monday's public meeting.
Board member Chris Wright likened it to going to a grocery store with a credit card. "You take home the groceries and the credit card company pays the store," he said. "You owe the credit card company the money with interest."
NIFA member George Marlin called the plan "another scheme to evade the approval process to borrow money."
Both agreed that if the county doesn't abandon the plan, NIFA should issue an order at its next meeting directing the county to give NIFA the agreement for review.
County Attorney John Ciampoli has said the deal does not need approval from either the legislature or NIFA because the county already is obligated to pay the refunds and each refund would be settled by order of a State Supreme Court judge.
He said Monday in response to the NIFA board members comments: "It is not a borrowing. No money comes into the county as is the case with a bonding." He said he regrets "the profound misunderstanding" and said his office would be happy to brief board members about the plan.
Also Monday, the NIFA board approved refinancing up to $313 million in county debt as a way to save as much as $30 million over the next four years.
NIFA staff said they had reviewed $1.53 billion in debt the agency had borrowed on Nassau's behalf and found it could save interest by refinancing as much as $313 million, depending upon market conditions on the day of the sale. NIFA, which has a AAA credit rating, issued county bonds during the past decade because it had a better credit rating than Nassau and could get lower interest costs. NIFA borrowing is paid back through county sales tax revenues.
"Benchmark rates for municipal bonds have reached close to historical lows," NIFA counsel Jeremy Wise told board members.
The refinancing is scheduled for next week. The county already has incorporated the savings into next year's budget and multiyear financial plan, with about $6.5 million in 2013.
NIFA also agreed to accept about $520,000 from UBS as part of a national $63.3 million settlement between the international Swiss bank and attorneys general of several states. The attorneys general alleged that UBS gained improper profits through "illegal schemes with other brokers and providers with whom they had relationships," NIFA staff said.