A judge on Friday temporarily blocked the Nassau Interim Finance Authority from exercising any control over Nassau's budget while he considers the legality of the state watchdog agency's takeover of the county's finances.
"I'm staying NIFA from doing anything," Justice Arthur Diamond said after a morning-long hearing on a lawsuit by Nassau County Executive Edward Mangano that seeks to permanently halt the takeover. The control period imposed by NIFA would give the agency broad powers to deny spending and borrowing.
The judge gave no date for a ruling on the merits of the lawsuit but said it would be "well in advance" of a March 31 deadline for NIFA to move to freeze union raises that go into effect April 1.
In the meantime, the control period legally remains in place but is unenforceable, and the county will not have to submit a revised budget that NIFA had demanded by next Tuesday.
The six-member NIFA board voted unanimously on Jan. 26 to declare the control period, citing a 2011 budget deficit of $176 million.
Mangano says his $2.6-billion budget is balanced and that the takeover is illegal. His lead lawyer in the case, William Savino of the Rivkin Radler firm, argued in court Friday that NIFA was taking over because it disagreed with Mangano's refusal to raise taxes to help balance the budget. "They just don't like the policies, the budget policies of fiscal year 2011," Savino said.
Savino and NIFA's outside counsel, Christopher Gunther of Skadden, Arps, Meagher & Flom, sparred for much of the court session over whether there is a deficit as defined by NIFA's enabling legislation; whether NIFA acted in an arbitrary and capricious manner in deciding to take over; and whether NIFA could take control without a home rule message from the county legislature that has the approval of the state legislature.
Gunther said that "it was the county that went to the state and asked for the bailout . . . hat in hand" in 2000, and that Mangano, a county legislator from Bethpage at the time, had voted in favor of the home rule message for NIFA.
The state, through NIFA, has a continuing interest in making sure the county is on sound fiscal footing as long as there are outstanding bonds that were issued by NIFA, Gunther told the judge.
Diamond also pressed the lawyers on whether Nassau County is bound to accept NIFA's oversight because it tells bondholders that NIFA has that power. Savino said it did not; Gunther said it did.
Savino argued that it was too early in the fiscal year for NIFA to make a determination that there would be a deficit. Gunther responded: "What are we supposed to do? Wait until the county goes bankrupt again?"