Nassau 'rainy day' fund $69 million in the red

Nassau County's rainy day emergency fund had a deficit of $68.8 million at the end of 2017, "severely limiting" the county's ability to cover an "unexpected, catastrophic event," Comptroller Jack Schnirman said Monday.

The drop was greater than expected, due largely to the county's failure to borrow $60 million in 2017 to pay property tax settlements and setting aside $43 million to pay a legal judgment to two men exonerated in a 1984 rape case, officials said.

Between 2016 and 2017, the county's rainy day fund balance plummeted by $116 million, according to the new findings. At the close of 2016, the fund balance was $46.8 million.

"Our savings account, if you will, is now in the red at $68.8 million dollars. Stop there for a moment. That is a disaster for the county. That is huge," Nassau County Comptroller Jack Schnirman said during an event on the steps of the Theodore Roosevelt Executive and Legislative building in Mineola.

"Our ability to cover an unexpected, catastrophic event is severely limited because we no longer have an available savings account," Schnirman said.

The report comes as Nassau County Executive Laura Curran prepares to introduce her 2019 budget in September. Nassau for decades has struggled with budget deficits as recurring revenues failed to cover the county's operating expenses. 

The county ended fiscal year 2017 with a $122.4 million deficit in its three primary operating funds, according to the report.

 Earlier this year, the comptroller's office had estimated a $48.9 million deficit for 2017. Comptroller's office officials said Monday the unaudited preliminary number excluded the performance of key operating funds.

In 2016, Nassau County had a $63.9 million surplus, according to the comptroller's Comprehensive Annual Financial Report.

The county's total operating budget is about $3 billion.

The report pegged Nassau's liability for tax certiorari payments at more than $500 million. Liabilities for court judgments are nearing $400 million, while deferred pension liabilities owed to New York State are more than $200 million.

Other contributors to the financial operating results in 2017: Less-than-expected revenue from sources such as the Federal Transit Administration and Nassau Regional Off-Track Betting Corp., and police termination pay that was $29.9 million more than expected, the report said. 

Nassau County Executive Laura Curran said the report "once again illustrates that the prior administration drained the county’s cash and spent more in 2017 than they did in 2016 without a source of funding. The outstanding tax certiorari payment debt continues to be the number one fiscal challenge for Nassau County."

Under former County Executive Edward Mangano, Nassau County for years borrowed more than $100 million a year to cover property tax settlements owed to homeowners and businesses that successfully challenged their assessments.

In 2014, the Nassau Interim Finance Authority, the county's financial control board, approved a plan that allowed the county to borrow $60 million in each of the years 2015, 2016 and 2017 to reduce the tax refund backlog. Mangano, citing the budget surplus, did not borrow the $60 million in 2017. 

Moody's Investors Service, a credit-rating agency, commended Nassau for ending the practice of relying on bonding to cover expenses. 

Also, Mangano in 2016 set aside $45 million in a restricted account to cover the legal judgment owed to two men wrongfully convicted in the 1984 rape case. A federal court had required the county to either reserve cash in a bank account or put up a bond as proof it could pay.

County officials on Monday said the money likely was moved out of the emergency fund in 2017. 

Curran, who took office Jan. 1, is expected to release her first budget proposal to the GOP-controlled legislature in the fall. 

"The report does not surprise the county executive. This is the fiscal crisis she inherited and she will deliver a sound, balanced budget," Curran spokesman Michael Martino said. 

Curran, in a statement, denounced a move by the Republican majority on Nassau's legislature to vote down a "home rule" message that could have helped give NIFA the ability to borrow $400 million more to pay tax refunds owed to commercial property owners.

"NIFA was created to access credit markets at better rates, and the county’s legislative majority neglected this assistance. This was shortsighted," Curran said. 

Frank Moroney, spokesman for the GOP legislative majority, quickly disputed Curran, saying: "Allowing NIFA to borrow money in the future would not affect the independent audit for 2017."

Presiding Officer Richard Nicolello (R-New Hyde Park) said GOP lawmakers received Schnirman's annual report on Monday morning and "staff will review and analyze the report and advise the majority of the findings by the independent auditors."

Minority Leader Kevan Abrahams (D-Freeport) said he was not surprised by Schnirman's report. He said he assumed that when the Mangano administration stopped borrowing to cover expenses, the fund balance would be in the red. 

"No one can convince me that bonding to be in the positive is good fiscal health for the county," Abrahams said. "There's nothing else to do but wait until the county executive sends us down a budget package that we can respond to."

The 250-page document complies with Generally Accepted Accounting Principles, GAAP, and has been audited by RSM, an international financial firm.