I cast the lone vote on the Nassau Interim Finance Authority board to reject Nassau County’s 2017 budget and multiyear plan. The budget is built on unwarranted optimism and denial of previous results. The level of risk is too high for a county forced to borrow to meet normal operating expenses.
The NIFA staff has calculated that after increasing revenues and reducing expenses by $36 million as the authority mandated, the $2.9 billion county budget for 2017 still faces a projected $106 million deficit. Nassau County officials have informed NIFA staff that they intend to meet the authority’s mandated $60 million maximum deficit, as calculated under generally accepted accounting principles, by not paying for real estate tax refunds. Not paying refunds is not the same as cutting expenses. The refunds will still have to be paid, and the county cannot afford to pay them out of operating expenses. Nassau is once again kicking the can down the road.
Unfortunately, the road has run out and the county is at the edge of a cliff.
NIFA is overly optimistic in counting $39 million in revenue from a new $55 fee for traffic violations. Various parties have said they will challenge the legality of the program, and local courts tend to allow moving violations to be reduced to less-expensive violations. County officials have told NIFA staff that if these risks materialize during 2017, they will introduce a new tax dedicated to funding real estate tax refunds. The idea that the county executive and county legislature would vote for a huge, midyear tax increase in an election year is not credible.
If the remaining years of the multiyear plan were realistic and credible, the county’s optimistic budget plan might be acceptable. Unfortunately, the county’s finances get much worse from 2018 to 2020. NIFA staff calculates budget risks in each of those years approaching $200 million and concludes that “the plan does not contain a reliable or realistic course for effectuating long-term balance.”
The county has included only $30 million per year in those years for real estate tax refunds, counting on its new Disputed Assessment Fund to significantly reduce the current $70 million liability. But the fund is certain to be challenged, and its legality will not be established for years. That creates a new $40 million annual budget hole. The county is including $20 million a year in savings/revenues from the privatization of the county’s sewer assets. This scheme has yet to be found feasible, and the recent increases in interest rates, which are expected to continue, have made its feasibility less likely. Nassau also is including $42 million in additional annual revenue or reduced expenses based on actions to be requested of New York State. This is an annual exercise that predictably ends in futility. And the risks of 2017 carry over to 2018-20. A reasonable analysis of those out years of the multiyear plan must conclude that the county will require major revenue increases or expense reductions to bring these years into balance.
Nassau County has borrowed almost $300 million from New York State since 2012 to make its full annual pension payments. The state put the program in place to help municipalities cope with rising pension contributions caused by the Great Recession of 2008. The crisis is over and Nassau needs to end the borrowing. The county cannot pay its real estate tax refunds without borrowing. Counting the more than $300 million potentially owed by the county in a tax refund lawsuit involving utilities, its unpaid real estate tax liability is probably approaching $1 billion, which will have to borrowed.
Albert Einstein defined insanity as doing the same thing over and over and hoping for a different result. That also describes the Nassau budget process.
Howard Weitzman is a member of the Nassau Interim Finance Authority and a former Nassau County comptroller.