Politics & Government

NIFA 'Continues to be Concerned' Over 2011 Nassau Budget

State watchdog hires attorneys, accountants in advance of Dec. 30 meeting.

The Nassau Interim Finance Authority (NIFA) may be getting ready to hand Nassau County Executive Ed Mangano a big lump of coal in his stocking this year. Holding a pre-Christmas meeting at the Long Island Marriott in Uniondale for most of Tuesday afternoon, it wasn't about what the six-member NIFA board of directors said, but what they didn't.

Board chairman Robert Stack adjourned the meeting around 3:40 p.m. to "discuss certain legal matters" and did not return with the other five directors until almost three hours later at 6:30 p.m. A conference with attorneys - including New York's former Chief Judge Judith Kaye, now a member of the law firm Skadden, Arps, Slate, Meagher & Flom LLP - inside an adjacent conference room had many speculating that an unprecedented takeover of Nassau County could happen in 2011.

NIFA may take over the county finances if Nassau runs a budget deficit of 1 percent or more. Using the county's current $2.6 billion budget, $75 million would total just under 3 percent. The county is reportedly facing a $343 million deficit. NIFA had previously expressed its concerns with the county's 2011 budget and multiyear financial plan.

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"Based on those concerns and that there might be need for additional expert advice, concerning certain technical requirements of the NIFA Act, staff was directed to solicit proposals from accounting firms to provide those services," board member Christopher Wright said.

On Nov. 15, NIFA requested bids from four accounting firms, receiving responses from two of them, and hired the firm of Grant Thornton as "a consultant" on Tuesday night.

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If NIFA were to assume control of county finances, it could deeply slash discretionary spending on programs and reopen union contracts for negotiation.  The move would also hamstring the county legislature, since all spending bills would have to go through NIFA for approval.

Since its inception in June 2000, NIFA has not assumed control of Nassau's finances at any time. New York State previously took control over Erie County in 2003, ending its control period in June 2009.

The board also took time to chide a press release issued Monday from the office of Nassau County comptroller George Maragos, who charged that NIFA "could have saved $5.21 million in 2011 if they had refinanced certain county debt under their management, as was requested." Maragos has publicly stated that both the 2010 and 2011 budgets are balanced, with the former coming in with a projected $5 million surplus. Last week Maragos and Mangano announced $23 million in additional budget cuts and reductions.

"We believe that the savings number is grossly inaccurate," Stack said, referring to the proposed refinancing. "In terms of (refinancing) the NIFA debt, our underwriters watch it. At the exact same time that this (Oct. 21) letter arrived, I had an... analysis completed which said that we only had $46 million of outstanding bonds, which had a saving of 1 percent and that would have given us a savings of $1.6 million."

Stack went on to explain that through "negative arbitrage," or earnings in escrow, and due to low interest rates, they would be losing $2.8 million on the deal.

"Comptroller Maragos had left out that he had asked that we consider closing out our (credit default) swaps," Stack said, adding that the move would result in a early termination penalty of $80 million. "The county did not want to lose $80 million by closing out its swaps that were, in fact, working fine," Stack said, calling Maragos' accusations "misleading," "not true and frankly, uninformed."

Returning after the three-hour break, Stack read from a prepared statement that the board had "reviewed myriad issues and matters," but made no official decision except to meet again on Dec. 30 at 10 a.m. at a place yet to be determined.

"The board of directors of NIFA continues to be concerned about the 2011 budget beginning Jan. 1, 2011," Stack said.


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