June 29, 2009
Weitzman: ‘Nassau County closes out books on a difficult year.’
2008 financial report shows sales tax decline presented significant problems
Nassau County Comptroller Howard Weitzman today said the County ended the 2008 fiscal year with a very small surplus of $2.1 million, in spite of a collapsing national economy that forced the administration to quickly realign its spending to finish the year with a surplus. The year end results were confirmed in the County’s 2008 Comprehensive Annual Financial Report (CAFR), released on June 26, 2009, which is audited by Deloitte & Touche LLP, an independent certified public accounting firm.
"Keeping the budget balanced in last year’s challenging fiscal climate was a test of champions for any municipal government.” said Weitzman. “It was a year unlike any other, but Nassau responded quickly.”
The CAFR reports on the finances of various funds and components of the County, including the Nassau Interim Finance Authority (NIFA), the Nassau County Tobacco Settlement Corporation, the Nassau County Sewer and Storm Water Finance Authority, the Nassau Community College, the Nassau Health Care Corporation, the Nassau Regional Off-Track Betting Corporation and the Nassau County Industrial Development Agency.
According to the report, during 2008, the County’s financial position was weakened by the national credit crisis and economic downturn. The County faced critical budgetary hurdles due to plummeting sales tax receipts, drops in other County revenues, higher than expected property tax refund costs, overtime costs in excess of the budgeted amount, and the failure of the State to approve several revenue-producing initiatives.
“The sales tax decline in 2008 presented significant problems for the County,” Weitzman said. “Sales tax dropped 0.8% below 2007 receipts, the first year-over-year decline since 1991, and came in approximately $37.7 million short of budget.”
The CAFR also reports on the County’s long-term debt for 2008, which totaled $3.2 billion. The amount of outstanding long-term debt issued to pay property tax refunds totaled $1.2 billion.
Property tax refunds reached $98.8 million in 2008, partially as a result of accelerated court calendars. The administration began paying refunds from its operating budget in 2006, a major change from prior practice and an important step in maintaining financial stability. However, the $40 million for property tax refunds included in the 2008 budget was insufficient. The administration relied on borrowing to fund the additional $58.8 million expense.
"The County’s need to rely on borrowed funds to pay a portion of its refunds is still deeply troubling,” Weitzman said.
This year’s CAFR will be the second report to reflect the County’s estimated future liability to fund health-care benefits for retired employees. The accounting-rule change, promulgated by the Governmental Accounting Standards Board (GASB) for 2007, is known as "GASB 45''. Governments are now required to disclose what their future retiree health-care costs are likely to total over the next 30 years. Nassau County’s liability is estimated to be $3.5 billion.
Comptroller Weitzman said that positive moves by the administration included saving $22.9 million by strictly controlling spending on contracts and other non-personnel expenses. The administration benefited in 2008 from the Suozzi administration’s conservative practice in earlier years of reserving $14.8 million more than required to resolve open labor agreements.
As a result of changes in the credit market, during 2008 NIFA refinanced its auction rate securities and converted to variable rate debt obligations. The County’s debt service expense in 2008 was approximately $22.7 million lower than budgeted as a result of lower interest rates and less than projected borrowings. This was partially offset by $9.9 million less in investment income, due to the lower interest rates on County investments.
The administration also used $17.6 million in excess cash from prior year capital projects to help balance the budget.
Other financial challenges faced by the County in 2008 included:
-While the County saw overtime come down in the fourth quarter; it was still $12.4 million over budget, primarily in public safety.
-Revenues received by Parks and other County Departments were $13.7 million under budget.
-The State did not enact into law the vast majority of the $19.6 million in initiatives that the County had requested; this was partially offset by $14 million in budgeted contingency funds.
The 2008 year end results do not include any additional funding from the federal government’s stimulus package. The County received approximately $7.5 million for 2008 Medicaid relief after the close of the books; the funds will be included as revenue in 2009.
In 2008 the County saw a small increase of approximately $1 million in its $122.9 million structural gap. A structural gap is the difference between recurring expenses and recurring revenues. Among the major items the County used to close the gap: $58.8 million in borrowed funds to pay real estate refunds, $25.3 million in reserved funds, $23 million from the tobacco settlement, and $17.9 million in prior year surplus. In order to reduce the County’s structural gap in the future, the administration will have to continue to reduce recurring expenses or identify new sources of recurring revenues.
The Comptroller’s Office will issue its projections for 2009 after August 1, 2009 as required under the County Charter. The full CAFR is available on the Comptroller’s website at email@example.com. A CD-ROM version may be obtained by calling the Comptroller’s communications unit at 571-2677.
The Government Finance Officers Association of the United States and Canada has awarded a certificate of Achievement for Excellence in Financial Reporting to the County for its 2007 CAFR, the 24th consecutive year in which the County’s report has been honored.
2008 Comprehensive Annual Financial Report (CAFR)