Editorial: Nassau debt sale needs careful scrutiny
Considering the political realities, Nassau County Executive Edward Mangano gets an A+ for creativity. He just announced a plan to let an investor, RPTF Llc of Uniondale, run by businessman Ivan Kaufman, buy the judgments of homeowners owed money because they won property tax assessment challenges. Kaufman would pay homeowners in the short term, and Nassau would pay RPTF for the judgments over seven years, out of operating revenue, at an interest rate of 5.95 percent. It's an innovative solution to Mangano's problem.
Traditionally, Nassau borrowed in the bond markets to pay these judgments. Mangano can't because Nassau's Democratic legislators won't give him the three votes he needs for a supermajority to approve the borrowing. The Democrats are mad about the Republican electoral redistricting plan set to go into place in 2013. So Mangano must find another way to get money.
Is the RPTF plan a legal option to get around the need for a supermajority? Possibly. People sell judgments all the time. If this company buys them, and the county pays it over seven years, you could argue no lending took place. You could also argue it's a seven-year loan. Lawyers for every side, including the Democrats in the legislature and the state control board overseeing the county's finances, are studying the situation.
Is it prudent? Yes and no. It's cheaper than paying homeowners 12 percent interest until their judgments are settled, but the 5.95 percent is a higher rate than what the county could get on the municipal bond market, which officials say would charge about 2.76 percent interest. Since it would be repaid in seven years rather than the normal bond term of 20, however, the total interest paid by the county would be lower, Mangano says.
Has the proposal been handled competently, transparently and wisely? No, not so far. Nassau Chief Judge Anthony Marano signed an order Tuesday to move these judgments to State Supreme Court Justice Thomas Adams, at the request of Nassau County Attorney John Ciampoli. The plan is Ciampoli's brainchild.
Asked how they found Kaufman, Mangano said they looked on Google. Separately, Ciampoli said Kaufman approached him, and the conversation had been going on since summer.
Neither Mangano nor his staff seemed to know until they were told during a conference call with the Newsday editorial board Wednesday that Kaufman was, until the end of last year, the chairman of the Independent Judicial Election Qualification Commission for the 10th Judicial District of New York, an appointed position that oversees the screening of candidates running for judgeships. Judges are needed to make this deal work.
Mangano and the judges involved are trying to do this deal very quickly, and quietly. It appears even more complicated than officials may realize. And it's fair to ask whether others should have had a shot at this business, perhaps via a request for proposals. That doesn't mean it's a bad solution. It might be a good one. But it does mean an awful lot of questions need to be answered before we can tell for sure.