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County Comptroller News Releases

Posted on: April 7, 2014


Mineola, NY- Nassau County Comptroller George Maragos released the 2013 unaudited fiscal results today and reported that the County is expected to end the year with a budgetary surplus of $54.7 million in the five operating funds. However, the County could have ended with a $60.8 million budgetary deficit without $115.5 million in borrowing to pay for property tax refunds, Judgments, Settlements and Termination Pay as authorized by the Legislature and the Nassau County Interim Finance Authority (NIFA).

“The County continues to struggle to repay 100% of the property tax refunds while taking in only 16% of the collected revenue, and to pay for the rising costs of police overtime,” Comptroller Maragos said. “The use of borrowings to pay for operating expenses is not the answer even if approved by the Legislature and NIFA. Structural reforms are needed to increase revenues, decrease expenses, and reduce the high levels of police overtime costs.”

Under Generally Accepted Accounting Principles (“GAAP”), as required for governmental financial reporting at the fund level, the County’s unaudited results for the fiscal year are expected to result in a budgetary surplus of $54.7 million or $58.7 million on a modified accrual (GAAP) basis, for the five operating funds. Based on reporting prescribed by NIFA, the County adjusts its modified accrual results for certain financing sources, including premiums on bonds issued, and borrowed funds for termination pay and property tax refunds. The County’s expected results for 2013 on a NIFA presentation basis of reporting will result in a negative $68.5 million. The NIFA result is a 60% improvement compared to the negative $169.5 million recorded in 2009, the final year of the previous Administration, but higher than the negative $64 million in 2012.

Effective with fiscal year 2013, the NIFA reporting methodology was revised. The County may now exclude from the adjustments to the County’s modified accrual results, the transfers from other funds to pay for debt service expense and investment income. This change had the effect of improving the NIFA presentation by $22.9 million in 2013 and improved the prior years’ results as shown in Table 2. The Structural Gap, which has been used historically to measure the financial health of the County, has continued to improve for the fourth consecutive year. The Structural Gap has progressively improved to $96.6 million in 2013 from $251.6 million in 2009, a 62% improvement, and better than the $116.9 million result in fiscal 2012. The Structural Gap is the difference between recurring revenues and expenses, and excludes non-recurring items, such as certain borrowings, and extraordinary items.

Table 1 summarizes the major variances to the 2013 Budget. Although revenues were lower than budgeted by $57.4 million or about 2.1%, the expenses were also lower by $112.1 million or 4.0% resulting in the $54.7 million budgetary surplus. Budgeted revenues fell short primarily due to lower Federal and State Aid but were offset by $18.5 million in higher sales tax revenues.

Expenses were $112.1 million better than budgeted primarily due to the use of borrowings to pay $11.7 million of budgeted Property Tax refunds and $22.1 million in budgeted Judgments and Settlements, as well as $32.8 million in lower Early Intervention and Pre-School costs, $26.7 million in lower Debt Service expenses, and $28.3 million in lower Payroll and Fringe Benefits. The lower expenses were offset by approximately $23.3 million in higher police overtime.

The positive expense variance would have been lowered to $30.4 million had additional borrowings of $81.7 million not been used to pay for unbudgeted property tax refunds, Termination Pay, Judgments and Settlements. This borrowing, in addition to other capital projects’ borrowings, increased the total County Long Term Debt at year-end to $3.64 billion up from $3.49 billion in 2012, for a net increase of $148.9 million (see Table 2).

Three major issues confront the County and threaten to unwind the multi-year fiscal plan; the rising long-term liability relating to property tax refunds, the wage freeze, which was re-imposed by NIFA for another year and is still under court appeal, and the growing overtime cost for police officers.

An additional $48 million of new property tax liabilities were added in 2013, which increased the total liability for property tax refunds to approximately $325 million. The courts have rejected the County’s attempt to end the “County Guarantee”, whereby the County pays the property tax refunds for the school, town and village portions of the tax. The County must now develop alternative solutions to make greater progress in reducing the growing liability, and revert to a PAYGO system to pay down the liability.
The recently negotiated labor concessions to end the wage freeze represent structural reforms that will provide long-term savings for taxpayers and will assist the Administration in reducing police overtime expenses through the hiring of an additional 450 police officers. However, these proposed labor agreements involve higher costs of about $120 million over the next four years that will need to be funded from uncertain new revenue sources.

“Increased borrowing to pay the growing property tax refunds and the potential increases in labor costs will continue to challenge achieving fiscal balance under NIFA’s accounting standard,” Comptroller Maragos said. “The Administration, the Legislature and NIFA must readjust the fiscal multi-year recovery plan with new revenue sources and greater economies in order to protect the County taxpayers.”

Table 1 and Table 2

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