The following appears in the April 25-May 1, 2014 issue of the Long Island Business News:
The Nassau Interim Finance Authority was created as an independent state authority in 2000 to help restore the county’s fiscal health, which had been suffering from mismanagement, cronyism and sleaze.
Prior to the state taking action, the Nassau County Legislature unanimously approved a home rule message requesting that Albany create a state oversight panel to guide the county’s budget policies. By asking for an authority possessing budgetary oversight powers, legislators conceded they couldn’t trust the elected government to manage the county’s finances responsibly.
To give elected officials time to reform the tax certs mess and to achieve a structurally balanced budget, the NIFA Act also permitted the county to borrow – and count as “operating revenues” – money to pay down accumulated tax certs refunds totaling $947 million through the end of 2007 only.
NIFA’s authority to approve or disapprove budgets and fiscal plans expired in 2008. Sadly, Nassau pols quickly reverted to bad fiscal behavior, forcing NIFA to impose a control period in January 2011.
By approving in April 2014 the Kaiman union deals, Nassau elected officials proved, once again, they are incapable of managing the county’s finances responsibly. They succumbed to pressure to approve contract amendments that every objective analysis concluded are not cost neutral and could cause the county to become insolvent.
NIFA directors are required to bring their own independent judgment to the table. Now it’s up to you to exercise that vested authority, to decide whether to approve or reject the Kaiman deals. But before casting your vote, here’s some food for thought for directors who either voted “yes” on the plan when it was presented, fact-free, on March 10, or from whom the public has yet to hear on the matter:
Director John Buran: As the CEO of a major banking institution, if a proposal came before your loan committee with questionable revenue streams and inaccurate cost assumptions similar to those in the Kaiman deals, would you vote for it?
Director Paul Leventhal: As a certified public accountant, would you sign off on a deal with these numbers? Would Nassau’s cash flow projections survive the analysis required to consider a “clean opinion?”
Director Lester Petracca: As a successful commercial real estate developer, would you invest in a project based on financial projections similar to those in the Kaiman deals?
Director Paul Annunziato: As a federally licensed financial advisor, would you recommend to your clients an investment with rose-colored estimated revenues and blinders-on cost estimates similar to the Kaiman deals?
The first control board was created in 1975 to prevent NYC from becoming a Detroit. To eliminate excessive short-term borrowing and to achieve a GAAP-balanced budget, the city had to eliminate 20 percent of the workforce and abolish scores of programs and departments.
The NYC Control Board succeeded because its members did their jobs and made unpopular decisions. Since 1982, NYC has had a GAAP-balanced budget every year and, as a result, the city has prospered.
If you vote to approve the Kaiman deals, you will cause irrevocable harm to existing and future control boards. You’ll destroy the belief that control boards are above the political fray. Ratings agencies and investors will lose all faith in them.
Approval of the Kaiman deals will also cause the county to issue more short-term debt to pay bills. Since rating agencies are very sensitive to such cash flow problems, expect county debt ratings to be downgraded.
Whether or not Nassau becomes a Detroit is up to you. How you exercise the independent judgment required of you is also up to you, not anyone else. You own your own votes and the consequences will inure to your personal and professional reputations.
I recommend you contemplate the words of Sir Thomas More: “When statesmen forsake their own private conscience for the sake of their public duties, they lead their country by a short route to chaos.”