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NIFA Takeover on Hold as Nassau Seeks to Void It in Court

NY State Supreme Court Stays Control Period

Nassau County’s government and the state watchdog agency NIFA entered the next step in their battle for ultimate financial authority over the county, as New York State Supreme Court Justice Arthur M. Diamond ruled to put NIFA’s “control period” on hold while the court considers Nassau’s arguments against the legality of the takeover. Nassau County attorneys, under County Executive Edward P. Mangano’s lead, have submitted to the court that the takeover was executed in violation of the law and was facilitated by an unfair change in NIFA’s policies. 

The Nassau Interim Finance Authority was created to keep the county in line financially, and is mandated to go into a control period in any year that a county budget involves a deficit of more than 1 percent. This year that would be about $27 million of the $2.7 billion budget. The agency decided that Mangano’s 2011 budget could go well beyond that, projecting a $176 million shortfall on Jan. 26, when the group announced its takeover.

Utilizing its authority sparingly, NIFA has begun this period only by asking for a revised budget from the county by Feb. 22. The county executive, however, maintains that his budget is sound and should not be altered.

Further, the county has indicated that a major deal struck with unions could be jeopardized if Nassau loses its financial authority. Mangano’s senior policy advisor, Brian Nevin, told Anton Community Newspapers that this year the county has effected a savings of $70 million over the next several years through negotiations with union workers that “reform salary structure,” successfully lowering compensation long-term.    

County workers do have a raise scheduled for April 1 of this year, however, and NIFA’s request for a new budget and its other, yet untapped powers could threaten the new agreement. NIFA can freeze wages, which the county believes is not a useful tool.

“That would provide $10 million in savings,” Nevin estimated, “minus NIFA’s cost of operation. By saving $70 million, we are saving significantly more than NIFA could ever save. And, when NIFA freezes wages, it can only be on year-by-year basis, so all the raises frozen go into effect right away [the next year]. All it does is push the problem down the road.”

He added, on another note, that the CSEA contract has a clause that gives the union the opportunity to make all its recent concessions null and void if NIFA takes action.

These are among many issues that have moved Mangano and the county to take to the courts. Nevin said that county lawyers, for starters, believe that NIFA’s takeover was based on a speculated deficit, and as the county says it is working with a surplus right now, to impose control based on such speculation was illegal.

Further, the attorneys for the county argue that NIFA is projecting a deficit by using a different set of standards than it has applied in previous years. They argue that the deficit is being calculated by changing the way it allows the county to keep its books, specifically allowing the county to account for its fund balance and certain borrowing as revenue.

 “They changed the rules in the middle of the game,” explained Nevin, saying, “For the last several years, they have allowed the county to count the money it borrows to pay for tax certioraris as revenue. Now that there are Republicans in office, they say you can’t count that. It is a double standard.”

In a document submitted to the New York State Supreme Court by the county, an argument is made that almost the entire $176 million deficit projected this year by NIFA is in fact created through a new change in its rules.

“The 100 million in tax certs borrowings that the county included as operating revenues in its 2011 budget constitutes almost two-thirds of the $176 million deficit that NIFA claims is in the 2011 budget… And when the $65.4 million available to the county in its fund balance is applied to the remaining alleged $76 million deficit, such alleged deficit is reduced [to] $10.6 million, well below the 1 percent threshold of $27 million for the County’s $2.7 billion budget,” the document states to the court.

In summary, the document argued, “Change can be a good thing… But by the same token, change is not always good. And when an administrative agency, on a whim as NIFA did here, changes the way in which it applies or enforces the law, the result is confusing and unfair to those who are subject to that agency’s jurisdiction. More to the point, the result is arbitrary and capricious and should be invalidated.”

At the time of this printing, NIFA was unavailable for comment.

An attorney representing NIFA at the hearing, Christopher J. Gunther of Skadden, Arps, Slate, Meagher & Flom LLP, said that his only comment was, “We were glad that the judge indicated he would rule promptly and we look forward to his decision.”