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Report: Nassau sales tax receipts could drop by up to $601 million next year

Nassau County Comptroller Jack Schnirman launches Nassau County

Nassau County Comptroller Jack Schnirman launches Nassau County Open Checkbook. Jan. 30, 2019 in Mineola. Credit: Howard Schnapp

Nassau sales tax revenues could be down by as much as $417 million this year and more than $601 million in 2021 if a second coronavirus shutdown comes, as the county faces a budget deficit projected at $749 million over the next 18 months, according to two new county reports.

A second coronavirus wave that forces another halt to in-person retail and restaurant activities could result in a scenario that results in a drop in sales tax revenue next year of up to 45%, according to a report by Nassau Comptroller Jack Schnirman's office.

The report, conducted in May with Manhattan accounting firm Crowe LLP, presents a hypothetical scenario based on another stay-at-home order beginning in mid-October followed by a gradual re-opening.

Sales tax revenues, which make up 40% of the county budget, would decline this year by $225.6 million to 416.7 million in 2020 -- for a maximum drop of nearly 33% -- and by $439.8 million to $601.7 million in 2021 -- or by a maximum of about 45%, according to the analysis.

“The county’s number one revenue is economically sensitive sales tax,” said Schnirman.

Noting that a strong economy produced $100 million in county reserves last year, Schnirman continued: “In 2019, we see a reestablished rainy day fund. But now see an unprecedented rain storm that you need a fiscal arc to navigate.”

Schnirman's projections came on the heels of another report released Tuesday night by the county's Office of Budget and Management showing Nassau was expected to run a deficit of $749 million over the next 18 months because of the pandemic. 

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The analysis showed the county with a $385 million budget shortfall in fiscal year 2020 and a $364 million deficit in 2021.

In both reports, the primary driver of county deficit is the steep decline in sales tax revenue.

The retail and hospitality sectors, including resturants, bars and hotels, account for nearly 70% of total taxable sales activities in Nassau and have posted year-over-year growth over the past four years, according to the comptroller's report.  

The pre-pandemic economic outlook at the beginning of 2020 was booming: 3.5% growth in sales tax, a 2019 surplus of more than $112 million and a $48.7 million jump in total revenue from 2018, according to the reports. 

County Executive Laura Curran said she plans to attack the huge expected budget gap in part by asking the Nassau Interim Finance Authority, the county's financial control board, to refinance $285 million in debt over the next two fiscal years. Budget savings also would come from program spending cuts and reduced future hiring, Curran said.

In addition, Curran and Schnirman, both Democrats, are calling on the federal government to provide more funding to state and local governments for pandemic recovery.

Majority Republicans on the Nassau County Legislature have expressed concern about incurring more debt through NIFA. They cite the long-term cost of new borrowing, which would extend the life of the board.

NIFA, a state-appointed board created in 2000, has the power to bond on behalf of the county, which typically must pay higher interest rates.   

Citing data from the Office of Legislative Budget Review, Republicans say NIFA costs have risen by 4.5% to 8.7% annually. 

"The county executive’s plan to have NIFA borrow money to fill a budget hole will saddle our children and grandchildren with debt and the expense for maintaining the NIFA bureaucracy for another 30 years," said Presiding Officer Richard Nicolello (R-New Hyde Park).

The analysis by the bipartisan legislative budget office, "shows that just the cost of paying for NIFA’s operation alone will be in the hundreds of millions," Nicolello said. "The county executive must go back to the drawing board and come up with better ideas."

Curran, who has called repeatedly for an accelerated safe reopening of Long Island's economy and schools has compared the loss of county sales tax revenue to "falling off a cliff." 

"Our downtowns are dying," Curran said. "We need to get this economy cranking again." 

Ron Gurrieri, president of the Nassau County Civil Service Employees Association, said he has joined Curran and others in pressing for more federal support for state and local governments. Gurrieri, who represents 8,000 public employees from clerks to nursing home aides, said the deficit projections "took me by surprise."

Without more federal aid, he said, "there will be a cut in essential services ... and when COVID comes around a second time or anytime someone needs an ambulance," public employees may not be there to respond to them because they are always the first person you look to cut when you're in a deficit."

"The county executive should look to spread the pain between the taxpayer and public employees if she has to do something like that," Gurrieri said. "After all public employees are taxpayers too."

NASSAU COUNTY BUDGET WOES

Projected deficit: $749 million over the next 18 months.

Sales tax revenues: Declines of $225.6 million to $416.7 million in 2020, and $439.8 million to $601.7 million in 2021 if a second wave of coronavirus infections prompts a second stay-at-home order.

Sources: Nassau County Office of Budget and Management; Nassau County comptroller

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