NIFA Statement – July 30, 2013 – By George J. Marlin

Statement by
George J. Marlin
Director
Nassau Interim Finance Authority

July 30, 2013

At the December 8, 2011 NIFA board meeting among other things I said:

“… The members of this Board are asked to approve a 2012-2015 Fiscal Plan that includes $305 million of new Tax Certs borrowing; $64 million in judgments and settlement borrowing and $80 million of borrowing for termination pay….

“In return for imposing on taxpayers another multi-generational backdoor tax increase, the County pledges it will … obtain $150 million of … cuts in the operating budget….

“Personally, I have very little faith in the County’s ability or will to achieve these goals.  In my judgment, the County has no creditability because time and again in dealing with fiscal matters, the County has been disingenuous, deceptive and delusional.

“However disturbed I am at the plan that the County has put before us today, and however skeptical I remain about its willingness to affect the measures necessary to effect fiscal change, I am also cognizant of our role as a Board and the repercussions our decision here today will have….

“To close the County, based on their unacceptable actions to date and on our fear that they will not do what they purport they will do, would not be unreasonable or unjustified.  Nevertheless, upon reflection, I believe that the Board should not exercise this Draconian option at this moment….

“And let me remind the County that approval of a plan is not approval of all the parts.  NIFA will base the approval of each part of the plan that comes before us in the coming months on whether the County carried out its responsibilities.”

Today I continue to have little faith in the County because it still fails to carry out its responsibilities.  The County broke its 2012 promise to obtain recurring cuts totaling $150 million.  And its claim that it did achieve $120 million in permanent cuts is suspect.

In 2012, for instance, the County closed not four police stations, as they budgeted, but only three.  In addition, the County’s claim that police station consolidations would achieve $18 million in annual savings has not materialized.  In fact, police overtime in 2013, year to date, versus the same period in 2012, is up $16 million.

Then there is the County’s absurd claim that it incurred a $41.5 million budgetary surplus in 2012.  The County came up with that number based on the fact that they failed to pay some current bills in 2012 and paid others by borrowing money.  For example, $88 million in tax cert refunds were not paid in 2012 but were pushed into fiscal 2013.  Also, there was an unbudgeted use of $10 million in reserves in 2012 and the use of $67.8 million in long-term borrowing to pay current bills such as termination payments.

These practices are like using one’s credit card to make current mortgage payments on one’s home and then making minimum payments on the credit card balance for the next thirty years.

The analysis of the 2012 budget based on Generally Accepted Accounting Principles (GAAP) reveals that the County incurred an $85.5 million deficit.

For this year, as of June 30, 2013, the GAAP deficit is projected to be $164 million.

Obviously, the County has learned nothing since the control period began two and a half years ago.  This may explain why the County’s ratings have been downgraded and may very well be downgraded again.

The County continues to kick the can down the road despite the County Executive’s statement to Meredith Whitney, author of Fate of the States, on July 3, 2012, “This ‘kick the can down the road’ policy has to stop.”

If the County is ever to get its fiscal house in order, officials must heed the recent comments of two people:

Kevyn Orr, Detroit’s Emergency Manager, gave this advice on July 22, 2013, to local officials with fiscal problems:  “Delay doesn’t produce positive outcomes.  So, whatever the problems are, deal with them.  Have the political will, the wherewithal, to deal with them now.”

Governor Andrew Cuomo, sitting between the Nassau and Suffolk County Executives in Albany on July 19, 2013, said:

“The difference between communities that thrive and communities that die is leadership.”

In other words, for Nassau to succeed there must be the will to govern.  Governing by press release will not cut it.

As for today’s motion—I remind the County of my words in December 2011 “that approval of a plan is not approval of all the parts.” 

Today I vote yea for this small sliver of the tax cert refunding plan because they did come up with some permanent cuts.  But if the County continues its fiscal shenanigans it cannot assume my support in the future.

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