July 1, 2008

COMPTROLLER WEITZMAN ISSUES ANNUAL REPORT,
CONFIRMS $23.8 MILLION BUDGET SURPLUS

New accounting rules now require county to reflect total health care liability for retirees

Nassau Comptroller Howard S. Weitzman said today that the county ended its 2007 fiscal year with a surplus of $23.8 million, despite the slowing housing market and less than robust sales tax numbers. The budget surplus was confirmed in the County’s 2007 Comprehensive Annual Financial Report (CAFR), released on July 1, 2008, which is audited by Deloitte & Touche LLP, an independent certified public accounting firm. This was the sixth consecutive surplus for the County since 2002 and represents the fourth year in a row a surplus was achieved without a tax increase under the Suozzi administration.

“The surplus is good news for County taxpayers in the face of a softening economy,” Weitzman said. “The County ended 2007 in good shape even though it received $20 million less in sales tax than it initially budgeted and had to spend an extra $37 million over budget on real estate tax refunds.”

This year’s CAFR will be the first report to reflect the County’s estimated future liability to fund health-care benefits for retired employees. The new 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 $3.4 billion.

“Because the County has implemented the new accounting rules on a timely basis, it will not affect Nassau County’s bond ratings nor will it raise taxes for our hard-pressed taxpayers,” said Weitzman.

The County’s pay out for residential and commercial property tax refunds was a concern for 2007, Weitzman said. The administration budgeted $50 million to pay refunds but closed the year with an expense of $87 million. The administration covered $25 million of the additional expense out of its operating surplus, but used $12 million in borrowed funds to pay the balance.

 “The need to borrow to pay a portion of the refunds is troubling,” Weitzman said. “Borrowing to pay each year’s refunds is a bad practice that resulted in Nassau borrowing more than $1.2 billion under prior administrations. A bright spot is the that county’s total property taxliability at the close of 2007 dropped $35.4 million from the previous year’s level to $101.8 million, which is significantly lower than the $325 million liability that existed at the end of 2002.”

The County achieved the surplus and overcame the challenges with sales tax and real estate refunds, primarily, through the following:

• $27.7 million over budget in revenues designated for the retirement of debt. Money that had been borrowed for capital projects in earlier years but never spent;
• $7.5 million over budget in investment income due to higher interest rates and better cash management;
• $7.2 million in interest savings, due to favorable markets for NIFA variable rate securities in 2007;
• $5 million under budget in Temporary Aid for Needy Families (TANF) case rolls;
• $3.4 million in restored property taxes;
• $3.3 million saved by diverting Persons In Need of Supervision (PINS) children from institutional settings;
• $12 million borrowed for 2007 real estate tax refunds.

A continued concern is the increase in the County’s structural gap to approximately $114.8 million in 2007, a sharp jump over the $59 million structural gap in 2006.  Weitzman added, “While most municipalities have a structural gap, the County’s finances are moving away from structural balance, as our recurring expenses outpace our recurring revenues. Even though the administration has held expense increases to an average of 3.75% since 2002, the County will need to further reduce the rate of expense increases or identify new sources of recurring revenue, in order to move towards structural balance. This has proven difficult to achieve in our mature suburban economy, with high school taxes, little economic growth and increasing expenses.”

The $138.6 million in non-recurring revenues used to close the 2007 structural gap included $47.5 million from reserves previously set aside to pay debt service, employee pensions and termination pay, $38.1 million in appropriated prior year surpluses, $23.6 million in tobacco proceeds, $17.4 million borrowed to fund projects with the MTA during the Gulotta administration, and $12 million in borrowed funds to pay real estate tax refunds.

Comprehensive Annual Financial Report Of The Comptroller
For The Fiscal Years Ended December 31, 2007 And 2006
(large file ~18mB - allow adequate download time)