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March 28, 2012

COMPTROLLER MARAGOS: NASSAU COUNTY ENDS FISCAL YEAR 2011 WITH A BUDGETARY SURPLUS

Borrowing Has Been Reduced by 75% From 2009

 

Nassau County Comptroller George Maragos released the County’s 2011 year-end unaudited fiscal results today and reported that the County is likely to end with a small budgetary surplus of $0.3 million.  The Structural Gap has continued to improve for the second consecutive year by approximately 7.4% to $127.4 million, down from $137.6 million in 2010. The Structural Gap is the difference between recurring revenues and expenses, and excludes non-recurring items that are customarily used to arrive at the budgetary balance, such as borrowings and asset sales. Additionally, the amount of borrowings during 2011 was reduced by approximately 75% to $82 million from $324.1 million in 2009, under the prior Administration.

For the first time since the Nassau County Interim Finance Authority (NIFA) was created, it has required that the County report its financial results on a NIFA-modified Generally Accepted Accounting Principles (GAAP) basis in addition to the usual budgetary and structural gap bases. For comparison, based on standard governmental GAAP (modified accrual basis), the County will end 2011 with a negative $36.9 million result. On a GAAP basis (with NIFA-defined adjustments), the County will end the 2011 fiscal year with a negative $167.6 million result.

NIFA’s GAAP presentation resulting in the negative $167.6 million excludes other financing sources and uses of revenue and expenditures, such as, the use of borrowed funds to pay for operating expenses, reimbursements to the operating fund from other non-primary funds for their debt expense, premium on bonds and investment income. Adding back these NIFA revenue exclusions and other adjustments as per Table 1 results in the budgetary surplus of $0.3 million.

In order to put NIFA’S GAAP presentation of the negative $167.6 million in perspective, under a similar presentation, the 2009 results in the final year of the previous Administration would have been a negative $184.3 million. The Mangano Administration’s 2011 year-end results consequently represent a 9% improvement from that year, on a NIFA-modified GAAP basis.

“It is worth highlighting that in all presentation forms, the County’s overall financial condition has improved, including two successive years of budgetary surpluses during the Mangano Administration,” Comptroller Maragos reported.

"The Mangano Administration, working cooperatively with NIFA, was able to deliver the 2011 budgetary surplus by reducing departmental costs, controlling expenses, imposing a hiring freeze, and reducing borrowing and related debt service costs,” said Comptroller Maragos.

Table 1 summarizes the major budget variances that resulted in a surplus. The budgeted revenue fell short by $73.2 million, primarily due to a $43.1 million shortfall in Fine and Forfeiture revenues, and $38.5 million in lower State Aid. However, expenses were also lower by $73.5 million due to the availability of $70.3 million in contingencies and $21.0 million in lower debt service costs resulting in the small budgetary surplus. Table 2 shows the comparative five-year financial presentation of County finances using the different presentation methodologies, budgetary, GAAP (with NIFA-defined adjustments) and Structural Gap. The improvements over the last three years can be noted.

The above unaudited results may be impacted by the treatment of $43.1 million in accrued short-term tax certiorari expenses against the County’s Capital Fund. The Administration has represented that there is sufficient Bond Authorization remaining as of the year ended December 31, 2011 with which to issue the bonds that will fund this expense, and the Administration intends to request that the County Legislature approve a Supplemental Appropriation in the amount of the accrual. Currently, this expense does not affect the County’s year-end results on a budgetary basis.

Three actions must occur  prior to the issuance of the County’s December 31, 2011 Comprehensive Annual Financial Report (CAFR) in June 2012 in order for the tax certiorari expense to be recorded in the County’s Capital Fund:

  • the Supplemental Appropriation must be approved by the Legislature;
  • the borrowing must then be approved by NIFA; and
  • a public bond offering must be issued.

If one or more of these actions do not take place prior to the issuance of the CAFR, then the entire $43.1 million must be accrued against operating results (the General Fund). Under this scenario, the County will end the year with a budgetary deficit of $42.8 million. The GAAP results (with NIFA-defined adjustments) of a negative $167.6 million would be unaffected.

Comptroller George Maragos concluded that, “continuing these fundamental improvements is a major challenge for the County going forward. The County will have to continue confronting acute challenges, such as, anticipated increases in health insurance premiums, pension expenses and other inflationary costs. At the same time, the County may be facing stagnant tax revenues and reductions in federal and state aid for mandated programs.”

PDF File 2011 Year End Results Charts