Nassau County officials are seeking approval to borrow $300 million to pay down a $360 million backlog of tax refunds, arguing that the move finally would allow the county to attack a pile of debt that is accruing interest at rates of up to 9 percent a year.
County officials say they plan to seek approval from the Republican-controlled legislature in September to borrow $100 million this year to pay past tax certiorari claims that total $360 million. The plan also calls for borrowing $100 million each in the first and fourth quarters of 2019.
“We owe taxpayers a substantial amount of money for their overpayments, and we’ve owed some of it for years, and we need the means to pay them back," said Mark Page, deputy county executive for finance. “They’re people who actually live here and pay taxes to us, and the whole premise of these cert payments is that it’s been determined that there was a mistake in the amount of tax they paid. So we owe them money."
Officials say retiring the debt would enable the county to pay off debt to taxpayers and gain control of most of the $360 million in debt. Most of the claims are between 3 and 4 years old, and accruing interest owed to the property owners ranges from 2 percent to 9 percent.
County officials wrote in their midyear report to Nassau's financial control board, the Nassau Interim Finance Authority, that paying these claims in 2017 "entirely used up the county’s available fund balance."
The county paid a total of $80.2 million from its general fund for tax refunds last year, according to data from the county comptroller's office.
Approval of the $300 million in borrowing would enable the county to devote about $20 million in operating costs in each of the next 20 years to cover the debt service, an approach that is "manageable," Page said.
Approval of the borrowing requires a bipartisan supermajority of 13 of the 19 county legislators. Republicans in the chamber outnumber Democrats, 11-8.
“We’ll consider whatever they send down to us,” said Presiding Officer Richard Nicolello (R-New Hyde Park).
Minority Leader Kevan Abrahams (D-Freeport) said his caucus would have to review the impact on the markets and credit agencies and whether NIFA will approve it.
"That’s an enormous amount of money," Abrahams said. “We’re still reviewing the pros and cons of considering a bond of that magnitude. Obviously, we understand what her [County Executive Laura Curran's] intent is, to bond to get rid of the backlog."
Laureen Harris, a commercial tax attorney who represents small-business owners in tax grievance cases against the county, said Nassau was "looking at the tiger right in the eye, and they're recognizing reality."
For her clients, “It’s just time. They need the money . . . They don't care what entity pays them on the judgments, or who authorizes it. They just know that they are entitled to be paid.”
The NIFA board traditionally has opposed borrowing for court judgments, severance and other claims they say should be paid from operating funds.
But NIFA chairman Adam Barsky said the board might be willing to consider an overall plan addressing the backlog, as long as county officials promise not to borrow for new tax settlement claims.
"We do understand there’s this overhang that has to be dealt with," Barsky said. “We recognize that the backlog has to be addressed, but before we sign on to doing a lot of that, we want to be comfortable that they have the plan going forward, where they’re going to commit to us they won’t come back to us for borrowing of new certs.”
Backlogged tax settlements have strained county finances for decades, and the county never has had enough in operating funds to cover them. Nassau paid out $444.9 million from 2013 through 2017 for tax claims, of which $320 million was borrowed, according to comptroller's data.
Nassau appealed unsuccessfully this year to the State Legislature to increase NIFA's borrowing authority by $400 million, in order to pay off tax cert debt. GOP state senators balked after Nassau legislators voted down a "home rule" message backing the bill, saying it would allow NIFA to exist through 2041.
Nassau, whose bond rating is weaker than NIFA's, would have to pay more in interest to bond buyers than the control board.
Last Tuesday, NIFA turned down a request by the county to borrow $23 million for a legal judgment for John Restivo and Dennis Halstead, who were wrongfully imprisoned. Nassau officials already had paid the payment and had hoped to apply the $23 million to pay down tax cert debt. A bipartisan group of legislators approved the borrowing in February, 13-6.
Howard Weitzman, the only NIFA director to vote in favor of the borrowing, said at the meeting that “a lot of the blame for this becoming an issue rests with the county. Nassau County, when they received approval to bond the $23 million, should have bonded the $23 million immediately."
Barsky said in an interview, "If you want to borrow for certs, come to me and say you want to borrow for certs. I didn’t want to be part of a shell game where you’re borrowing for Restivo, and you’re going to take the money and you’re going to use it to pay certs. It just didn’t make a lot of sense to me.”