It's time for Nassau County Executive Edward Mangano to pull the plug on a proposal to allow a private investor to buy $20 million in debt from residential tax protest firms that won property tax refunds last year.
The Nassau Interim Finance Authority, a state board overseeing county finances, along with Comptroller George Maragos, Mangano's fellow and often-policy-friendly Republican, panned the move big time this week.
Still, the administration asserts that the plan is a viable, if creative way for fiscally fragile Nassau to satisfy court-ordered settlements with some 18,000 homeowners who have been waiting a year for their money.
The investor, RPTF Llc of Uniondale, would pay off homeowners now. Nassau would repay RPTF over time, with interest, through operating revenue.
As Maragos and NIFA made clear, the administration's move to essentially funnel business to the firm amounts to an extraordinary reach around Nassau's review and approval procedures.
The deal amounts to more borrowing at unnecessarily high interest for a county already carrying tremendous debt on its books, they said. The assertion that the transaction amounts to borrowing is key: New borrowing is supposed to be approved by NIFA and the county legislature. Democrats have blocked borrowing for settlement payments in a dispute over legislative redistricting.
During a NIFA meeting on Monday, board member Christopher Wright said that if Mangano goes through with the transaction, Wright will ask NIFA to approve an order -- with the force of law -- to stop it.
Wednesday, a Mangano spokesman said the county executive has communicated with Ronald Stack, NIFA board chairman. Mangano "has directed the county attorney to provide all judgment documents, as well as all opinions sought to NIFA for their review," spokesman Brian Nevin said in an email.
"As way of background, which everyone seems to gloss over, the county executive has not, nor is he contemplating, signing any agreement with any third party with respect to the judgments, Nevin said.
Technically, this is true.
Under the arrangement, the private investor would buy the judgments not from Nassau but from tax protest firms. Once the judgments are in the investor's hands, they would become claims, rather than judgments, against the county.
And the county has signed an agreement with the investor to repay its costs over seven years at 5.95 percent interest.
The bottom line? The investor fronts money that the county will have to pay back. And because the administration says it's not borrowing, the entire process would be exempt from legislative and NIFA scrutiny, according to the administration.
It's a scheme screaming to be stopped -- or at minimum carefully and publicly reviewed, as taxpayer money will repay the investor.
For one, the private investor would get what amounts to a sweetheart deal, since there appears to have been no competitive bidding before Nassau crafted an agreement with the investor. For another, the firm, according to a Newsday report, has not been incorporated, has no website and no telephone number in the public record.
A more fiscally prudent plan, according to Maragos, would be for Nassau to lose the investor and in State Supreme Court reach an identical payment plan and interest rate directly with homeowners.
That's the way to go.