Introduction

Nassau County began the 21st century with its finances in disarray. After struggling through the 1990's with ever-increasing budget gaps, mounting debt and repeated reductions in municipal bond ratings, Nassau County sought help from the State of New York. In June 2000, Governor Pataki signed legislation creating the Nassau County Interim Financing Authority (NIFA). The purpose of NIFA is to help restore fiscal health to the county and ensure adequate funding for essential services and infrastructure rebuilding.

In September 2001, the prior administration submitted a fiscal recovery plan to NIFA. Since the plan failed to address Nassau County's structural budget deficits, NIFA rejected the plan. Upon taking office, County Executive Thomas R. Suozzi was required by NIFA to provide a plan by April 1, 2002, for adoption by the county legislature and approval by the NIFA Board.

Nassau County's new multi-year financial plan provides a detailed fiscal recovery plan for the years 2002-2005. The plan contains an analysis of the $428 million annual deficit which Nassau County faces in 2005, and the measures proposed to close the gap.

The $428 Million Deficit

After examining revenue projections and expense allocations over the multi-year period, Nassau County projects annual deficits as follows:

The factors contributing to the $428 million deficit are readily identifiable. During the past ninety days, the County Executive has uncovered managerial, operational and systemic failures including:

• Bad Management

  The County government has been badly managed for many, many years. No planning, no accountability, no innovation were the rule rather than the exception. A few examples tell it all: the County had 8,000 telephone lines for 6,000 workers; the contract approval process consisted of 21 steps, all of which were manually tracked; scores of uncashed checks were found sitting in drawers of unoccupied desks. Lack of employee supervision, failure to formulate long range strategic plans and lack of performance measurement and evaluations not only resulted in rampant waste and inefficiency but also caused the total demoralization of the County work force.

• Lack of Budgetary Controls

  A single statistic says it all - Nassau County's debt service consumes 16% of its operating budget, the highest percentage of any county in New York State. Suffolk County is the second highest at 8%. Another excess was over-reliance on one-shot infusions of cash (derived, for example, from the sale of properties like the county hospital; pledging over $250 million in capital funds to the Long Island Rail Road in exchange for $125 million in cash; or securitizing the proceeds of the tobacco settlement to receive an immediate one-time lump sum). All contributed to the double whammy of unbalanced budgets and deficit spending. These problems are exacerbated by run-away long-term borrowing to pay day-to-day operational expenses instead of investing in long-lived assets like new buildings or infrastructure improvements.

• Overly Generous Labor Contracts

  The average police officer in Nassau County earns $100,000. The rest of the civil service workforce works a 6¾-hour day. The County workforce has enjoyed across-the-board wage increases that significantly outpaced inflation. The total Police Benevolent Association (PBA) increase over 1996-2000 of 24.1% is nearly double the 12.5% inflation rate over this period. Yet in the last ten years, the County leadership presented only one case to an arbitrator offering little evidence of its need to control overreaching and expensive fiscal and work rule demands.

• Flawed Property Assessment System

  Because of incorrect and outdated property assessments, and the failure to correct these inaccuracies at the administrative level, the County suffered an ever-mounting property tax refund bill. Due to a New York State law, which only applies to Nassau County, the county, receives about 20% of local real estate taxes collected, but pays out 100% when those tax bills are successfully challenged. Additionally, instead of paying this debt from the annual operating budget, the County began to issue long-term bonds to cover the liability. Today this debt amounts to $1.1 billion dollars. Property tax refund debt is a substantial portion of the $1,979 per capita burden on the taxpayers as a result of the County's past borrowing practices.

• Information Technology Deficit

  The County Attorney's Office keeps track of its cases on 3 x 5 index cards. The Treasurer tracks cash balances in over 100 bank accounts and future payments of debt principal and interest manually in handwritten seven column ledgers. The state of the County's antiquated technology is a major obstacle to efficient management and expeditious service to taxpayers. A comparatively small investment in 21st century equipment and software will result in enormous savings and improvements in service deliveries.

  Gap-closing Measures

  To close the projected annual deficit of $428 million in 2005, Nassau County has developed a multi-year plan containing $313 million in managerial initiatives, cost cutting measures and non-tax revenue enhancements, and $115 million in new tax revenues. This plan proposes a five-part solution to erasing Nassau County's structural deficit:

  Eliminating the Deficit A Five-Part Plan Savings (73%) Millions   Workforce Reduction $101 (24%) Managerial Initiatives $ 73 (17%) Labor Concessions $ 65 (15%) Debt Reduction and Restructuring $ 74    (17%)     $313 (73%) Revenues (27%)      19.4% Increase in the County Portion of Real Property Taxes* $115    (27%)   Total $428 million *Equals a 3.9% increase in the total real property tax bill for the average homeowner, approximating a $223.56 average tax increase and a $182.29 median tax increase.

  
  
  
  

  The Savings Component

  Nassau County will achieve $313 million in savings through the following managerial initiatives, cost-cutting measures and non-tax revenue enhancements:

• Workforce Reduction

  The multi-year financial plan identifies $101 million in savings by reducing the size of Nassau County's workforce by 1,200 employees. The four key elements to this reduction plan are: attrition; early retirement via a New York State Employees' Retirement incentive program; terminations resulting from a new employee appraisal process; and, if necessary, civil service layoffs.

• Managerial Initiatives

  Approximately $73 million in savings will result from managerial and programmatic improvements in Nassau County operations. County departments have been reorganized and grouped by functionality under Deputy County Executives charged with developing key performance indicators for services delivered. The plan focuses on such efficiencies as building consolidations; minimization of personal services contracts; use of a Medicaid utilization analysis to reduce fraud; energy savings; greater use of grant funds; and cuts in non-mandated program costs.

  Additionally, the plan recognizes that some savings will be offset by costs associated with investments the County must make. For example, updated information technology will replace antiquated manual systems at the Assessment Review Commission. Currently, public safety departments have multiple databases, which need to be consolidated and improved to process individuals through the criminal justice system more efficiently.

• Concession from Labor Organizations

  The plan includes $65 million in negotiated labor concessions from the major employee organizations representing county employees including: The Police Benevolent Association ($30 million), Detectives Association Incorporated ($2 million), Superior Officers Association ($5 million), Sheriff Officers Association ($3 million) and The Civil Service Employees Association ($25 million).

  Through the collective bargaining process and, where appropriate, interest arbitration proceedings, Nassau County must achieve wage and fringe benefit concessions, time and leave adjustments, redeployment of the workforce, civilianization and work rule changes.

  Where labor concessions are not achieved, the County will rely on greater workforce reductions through layoffs.

• Debt Reduction and Restructuring

  This is a long-term program designed to achieve overall debt reduction and a leveling off of debt service payments. By reducing and restructuring debt, the County will save $74 million in 2005. The objectives of the plan are to lower the County's debt burden and obtain a higher credit rating from the financial institutions which rate municipal credit.

  To accomplish these reforms, Nassau County will prioritize its capital needs and reduce the size of its annual debt-based capital program; rely less on short-term borrowing to supplement its cash flow; refinance property tax refund debt under NIFA's better credit rating and pay this debt off 12 years earlier; and implement pay-as-we-go procedures in 2005 to reduce the county's dependence on debt to fund items not associated with long-lived assets, such as legal judgments.

  Additionally, Nassau County will establish a Sewer and Storm Water Authority to consolidate 27 collection units and three sewer districts permitting a more efficient day-to-day operation and ensuring compliance with tough environmental and storm water regulations. It will permit older sewer debt to be refinanced under more favorable terms and restructured to match the useful life of the underlying assets. Through the creation of a Sewer and Storm Water Authority, the County may be able to achieve significant savings by issuing this debt through New York State's Environmental Facilities Corporation ("EFC") and taking advantage of its 33% to 50% interest subsidies.

  Revenue Component

• Real Property Tax Increases

  The County currently owes $1.1 billion to pay property tax refunds that resulted from its antiquated property valuation system and the significant losses experienced in tax lawsuits and appeals. This is a major reason why the County is in such poor financial shape. The Multi-Year Financial Plan includes $115 million in new tax revenues from a proposed increase of 19.4% in the County's portion of property taxes. This represents a 3.9% increase in a property owner's total property tax bill and an increase in property taxes paid by the average homeowner in Nassau County of $223.56 and $182.29 for the median homeowner. Under the Plan, the funds from this tax increase will be dedicated to a segregated fund and used exclusively to retire this tax refund debt 12 years earlier.

  To assist senior citizens on fixed incomes, the Plan also proposes that the County enact an exemption for senior citizens modeled on the State's STAR Enhanced Exemption. Senior citizen property taxpayers earning less than $60,000 annually will be exempt from the tax increase. Using the same criteria that New York State uses for the STAR Enhanced Exemption, it is estimated that over 53,000 Nassau County senior citizen households will receive this tax relief and save $5 million in property taxes annually.

  Implementation of the Multi-Year Financial Plan

  Nassau County is dedicated to ensuring implementation of the four-year plan. Critical to this is the already accomplished reorganization of all County agencies into five tightly supervised operational verticals and their extensive cross-departmental support services. The keystone of this system is performance measurement and personnel evaluation, reporting departmental results to the County Executive.

  Further, certain crucial segments of the plan depend upon State legislative enactments which do not require State funds. The major bills presented to the State Legislature this month require:

  • Creation of a Sewer and Storm Water Authority to enable a debt restructuring which will save $12.2 million
  • Amendment of the Nassau Interim Finance Authority Act ("NIFA") to authorize restructure of $790 million in tax certiorari (property tax refund) debt and extend bonding authority for one year
  • Amendment of NIFA to provide that labor arbitrators must factor in the County's multi-year financial plan
  • Reform of assessment grievance procedures to give the assessment review commission one year to correct assessments before tax bills are issued
  • Designation of portions of Nassau County as an Empire Opportunity Zone to enable the receipt of empowerment funds
  • Reform of traffic and parking violations legislation to provide for direct managerial control by the County Executive
  • Amendment of the Enhanced Star program to permit exemptions for seniors on the County portion of property tax bills

  Conclusion

  Nassau County, with a population of 1.3 million occupying 298 square miles on Long Island between Suffolk County and New York City's Queens County, including two cities, three towns, 64 villages, 70 hamlets, and 56 school districts, is the nation's first mature suburban community. Although it prospered and developed as a bedroom community after World War II, Nassau County faces different challenges today. Nassau County must meet the demands of an aging population and a more service-based economy by downsizing the county workforce and updating its own management practices, systems, and departmental programs.

  The multi-year financial plan restores fiscal integrity to county operations, closes the structural budget gaps in county spending, and permits the county to begin addressing the needs of its residents, businesses and partners in future economic development.

  State of the County Address