Brown: Nassau, Suffolk face questions about debt

Nassau County Executive Edward Mangano, in his State of the County speech Wednesday night, backhandedly castigated Democrats for blocking his proposal to borrow to cover refunds of successful property tax appeals.

"Rather than play political games and threaten to block the solution to Nassau's fiscal stability," Mangano said, "the time is now for the Democrat county legislators to . . . join NIFA, the majority legislature and me in implementing a plan that prevents a property tax hike and pays off the tax refunds owed to our residents."

Democrats have threatened to deny Mangano, a Republican, and the county legislature, controlled 10-9 by the GOP, the supermajority necessary to borrow up to $450 million for those and other expenses.

Democrats are using the tack in part as political leverage in their attempt to influence the redrawing of legislative lines -- a process that favors the party in power.

Lost in such machinations, however, is the very real question of whether Nassau -- and, for that matter, Suffolk, which on Tuesday got legislative approval for short-term borrowing of up to $90 million -- should count on big borrowing to get through hard times.

In Suffolk, County Executive Steve Bellone had little choice but to seek approval for a bond sale: The county needed the authority to guarantee it could make payroll through April.

It remains to be seen whether Bellone, who is hurriedly crafting a plan to deal with a projected cumulative deficit of $530 million over three years, will include more borrowing as part of the remedy.

Bellone could try to seek state approval to bond the cost of public employee labor settlements. Four of the county's 10 public employee unions are in negotiations, two are in arbitration and one is in mediation.

The contract for the Association of Municipal Employees -- the county's largest union, representing 55 percent of employees -- is up at the end of the year. Contracts for two unions representing the community college expire in 2015.

The upside? Immediate -- albeit, one-shot -- savings. The downside? The same as with any significant borrowing: Kicking the problem, along with increased costs, into the future.

Bellone also could also try to restructure older county debt to take advantage of today's lower interest rates. It's another move that would require state approval -- and another that would benefit the county now, but kick increased costs into the future.

While Suffolk may -- or may not, since Bellone, for now, remains tight-lipped on his plans -- consider such options, Nassau's already borrowed multiple times.

Shortly after its creation in 2000, the Nassau Interim Finance Authority, which now controls county finances, helped Nassau save on the cost of debt service. In NIFA's 2010 annual report, those savings were estimated at about $400 million.

Property tax owners are paying off that NIFA-issued debt, plus an increasing amount of debt incurred since former County Executive Thomas Suozzi reversed a trend and began borrowing heavily to cover the cost of property tax appeals.

Under a deal with NIFA, Mangano has proposed borrowing up to $450 million, if necessary, to help the county reach a balanced budget by 2015.

The Democrats' refusal to go along on property tax refunds -- a problem Suffolk does not have because assessment is handled by the towns -- or anything else down the line would force Mangano to seek relief elsewhere.

As it is, Nassau puts a significant amount of its revenue toward paying off debt. The county's debt, in fact, was one of the problems NIFA identified a decade ago.

Will Suffolk, facing a comparatively meager debt load, follow suit?

Stay tuned.