A major Wall Street ratings agency commended Nassau County this week for announcing that it will not borrow this year to pay refunds to taxpayers who successfully challenged their property tax assessments.
Moody’s Investors Service reported Wednesday that Nassau’s plan to stop borrowing a year earlier than required by the county’s financial control board is “credit positive.”
Although the $60 million Nassau had planned to borrow for the tax refunds “would have been small relative to the county’s $2.9 billion operating budget, the elimination demonstrates a willingness to work towards halting the use of non-recurring revenue,” the ratings agency wrote.
Nassau officials said last week that the county would not have to borrow this year to pay the tax refund costs of about $80 million annually because it ended 2016 with an $80 million budget surplus. That surplus has yet to be confirmed by the county’s outside auditors.
County officials say the surplus includes $17 million in salary savings; $7 million in savings for contractual services and supplies; $19 million saved in termination pay because of fewer police retirements than budgeted; and $18 million saved because of a decreased social services caseload.
Also, the county’s traffic ticket agency increased revenue by $12 million and sales tax collections came in $6 million more than expected. The county borrowed $60 million to pay tax refunds last year while the county also paid $10 million in refunds from operating funds, officials say.
County Executive Edward Mangano said Thursday he was “pleased” with Moody’s comments about his decision to stop borrowing. “This policy decision will save taxpayers over $30 million dollars in interest payments and Moody’s recognition will help” Nassau when it borrows for capital projects.
The county’s financial control board, the Nassau Interim Finance Authority, had directed the county to end borrowing to pay tax refunds in 2018.
“This is major step in the right direction,” NIFA Chairman Adam Barsky said. “A lot more work has to be done. But I see this as a major milestone.”
Barsky said Nassau’s budget problems were due to the county practice of borrowing to pay operating expenses — primarily property tax refunds, but also employee severance and legal judgments. NIFA refused to approve borrowing to pay severance costs last year and has not approved any borrowing for judgments so far this year, Barsky said.
Nassau still needs to bring its recurring expenses in line with its recurring revenues, he said.
NIFA has projected a $100 million deficit this year, when borrowing, one-time revenues and savings from deferred pension payments are excluded from the bottom line. NIFA has directed Nassau to close the gap to $60 million.
“Borrowing is still not revenue and the county does not have a surplus,” said NIFA member Chris Wright. “We should hold off on the medal ceremony until the county actually balances its budget.”