Nassau County Comptroller Howard Weitzman was the guest speaker at the last New Hyde Park Chamber of Commerce meeting held at the Inn at New Hyde Park.
Chamber members with Nassau County Comptroller Howard Weitzman include Chamber 1st Vice President Stewart Small, former President Angela Powers, Third Vice President Jeannette Fiasina, Weitzman, New Hyde Park Chamber President Richard DeMartino, 2nd Vice Ppresident Mark Leyten, Treasurer Chris Vulpis and Secretary John Gebbe.
Weitzman started off his speech by saying that the Inn at New Hyde Park held a special place in his heart since it was where he first announced, at a fundraiser, that he was running for office. He said the original date of the fundraiser was September 11, 2001, but, obviously, was cancelled and held on Oct. 31st of 2001, so he said, "It's been lucky for me ever since, both the Inn at New Hyde Park and the people of New Hyde Park, and it really is a pleasure to be back."
He continued, "I am going to talk about this economic challenge that we all face, I will give you how we see it from our prospective, how it will affect Nassau County and what that means to you. Then I will give you some ideas of what I think you should be thinking about in terms of adjusting to this kind of economic tsunami, for a lack of a better term."
Weitzman continued, "This doesn't come as a surprise to anyone that we are probably now in the midst of some of the most difficult economic times than most of us have ever seen. I can't remember more difficult economic challenges than we are facing right now. In fact, the thing that makes it so challenging is that when I talk to people who are my seniors, who are very wise and very learned and who I take advice from, their comments are that they have never seen anything like this and so it's very hard to predict what is going to happen. Generally, we can predict what is going to happen in the future by looking back, but we are in a situation that we have never seen, so looking back may not be as helpful as it has been in the past."
He went on to say that the entire economic problem was started with the meltdown of sub prime mortgages and he added, "We all know, with the benefit of hindsight, that credit was given too easily."
He then went on to say that too many people were allowed to buy houses who couldn't afford them and that credit was given out too easily He said, "It got so crazy at the end that people were actually walking away with more money than they started with and a title to a house.
"At the end sub prime crisis mortgages were being lent out with negative amortization, so the mortgage kept going up in value all of this was predicated on the premise that houses would always go up in value, for ever and ever.
"And, we know that nothing lasts forever and certainly as we found out, housing prices were subject to the laws of gravity, like everything else and when they started to come down the entire house of cards fell down.
"So the first thing that happened was the sub prime crisis led to toxic assets in the banks. The security agents of these mortgages, where nobody knew who owned what, nobody knew what part of what mortgage people owned. All they knew was that they were going to get their interest every month and it was rated Triple A by Standard and Poor's and Moody's.
"Then we found out that Standard and Poor's and Moody's really didn't know what they were rating; really didn't understand the projects and they downgraded those products which caused those projects to plummet, When their values plummeted the banks started to recognize losses on their books and then we we found out that the banks were a house of cards. In fact, the assets that were built up in these banks were reinvested security agents that weren't worth anything.
"So, now we find out that most of the banks in the United States are insolvent. The reality is, if you look at their balance sheets, and value the assets that they have, the real value that people would pay today...they are insolvent.
"So, what did they do? They stopped lending money. We are a society that is built on credit. We have always been built on credit since the time of founding of this nation we have been an indebted nation. So, when people tell you oh, we owe all this money to foreigners, it's a terrible thing, we have always owed money. That is how this country was built. But, credit stopped. Banks were afraid to lend to banks and if banks don't lend to banks that means that the banks on the receiving end of those loans don't lend to businesses and businesses could not get credit and to this day it is very difficult. And, I am not telling you anything you don't know. You are the chamber of commerce. But, individuals could not get credit. The lines of credit either on their homes or on their home equity loans were either being pulled because the value in their house was going down or their credit cards were being cancelled or their outstanding lines of credit were being reduced."
"Consumers behaved normally, like everybody else, when your lines of credit are cut and you have no line of credit consumers stop purchasing and the result we are seeing in Nassau County where there is possibly the worst retail drought that we have ever seen. All behavior of consumers who are very nervous."
Weitzman went on to say, "It is hard not to be nervous since every time we read the paper it's about the deficits all over the county. New York State has a $16 billion deficit; California has a $40 billion deficit; Nassau County faces a $120 million hole in their budget. This doesn't exactly cause people to have confidence and to want to go out and buy a new car or buy a new dress or buy a new anything. So what are consumers doing? Most consumers are still working. We still have today, in Nassau County, one of the lowest unemployment rates in the country. Our unemployment is 6 to 6 1/2 percent and maybe it will go to 7 percent at the end of year but in actual numbers we are doing fine. "Look at housing values, they did come down a little bit, but look at where they went up to when they rose up when they reached a peak in 2007 and 2008 and now they are coming back to normal rates."
Weitzman continued, "Now we have a new president and whether Republican or Democrat, all people wish him well and hope that his economic stimulus plans are successful in bringing the country back. But, that's a hope and a prayer and a lot of money because consumers are not spending money. In the long term this is a good thing, so if we now turn into a savings society and the consumers that are working, but not spending and their cash loads are the same, they are taking that money and paying down debts, paying down credit cards and saving money in the banks. That's a good thing because the money they are saving will eventually be reinvested in business then that will enable our economy to get back on track. In the short term, however, it is causing some unbelievable pain."
In Nassau County government gets its revenues from two sources. Property taxes and sales taxes. Town governments are almost entirely funded by property tax. Property taxes in Nassau County are very high but their collections are relatively constant.
Weitzman said, "Sales tax is different and hard to predict what the consumer will do. For the county sales tax is the number one source of revenue. Forty percent of the county's revenue is in sales tax or a billion dollars a year. In 2008 sales tax declined for the first time since 1991, a 1 percent decline. In 2009 the county projected a zero increase in sales tax, which we thought was conservative. In the fourth quarter of last year, in the holiday season, we had an 8 percent decline in sales tax. As a result, we are preparing for a 5.8 percent decline in 2009. That means for the first time in history of this county that sales tax has declined two years in a row. It has never happened before and that hole in our budget, from sales tax alone is estimated to be about $120 million.
"We estimate we have to adjust budget by $150 million for 2009 to bring our budgets so that revenues equal expenses. Unlike the federal government local governments can't print money. But, how?"
Weitxman said, "So, where is this money going to come from. We actually put together a three-part plan and part of that plan is from the Economic Stimulus package coming out of Washington. We have been working very closely with New York State Senator Charles Schumer to bring home money from New York State.
"So we estimate that we get about $50 million in budget relief as a result of this and maybe a little more and that will give us time to adjust our budget because there are not many who believe that the sales tax will come back to where it was. I think it will go up, but not to the levels they once were."
The second part of the plan, Weitzman said, "We have asked Albany for permission to raise revenues in Nassau County. Local governments in New York State need permission from Albany to raise revenues.
"We want to raise cigarette taxes in the same way New York City did because if we do that people will stop smoking. And that will raise revenues. The second is red light camera installations like they have in New York City and that will definitely keep people from going through red lights in intersections.
"Third area is an energy tax. Nassau County is the only county that does not charge sales tax on energy on home heating oil and gasoline and the county executive is considering a 2 1/12 percent tax.
"The third part of the plan would be a reduction of wages, salaries and benefits of county workers. That obviously is the most contentious part of the plan because the majority of the county work force is unionized. The only action we can take is to reduce the number of people on the payroll or actually close down the county for a number of days to bring down expenses.
"He is working closely with all the unions to see what kind of a plan they can come up with an alternative to reduce the budget. We are very hopeful because the unions understand. Everybody in Nassau County is asked to give back to make up that budget hole."
Comptroller Weitzman wrapped up his talk with a brief long-term outlook. He said, "Nassau County is blessed with some of the finest natural advantages of anyplace in America. Our location next to New York City will never change. We have an unbelievable transportation network, it only takes 28 minutes from New Hyde Park to get into the city. Our hospitals, colleges are the best in the county and our recreational opportunities out here with the golf courses, beaches and parks are amazing. Most areas just don't have those kinds of resources. So people want to live here. So, in the long term I think we are going to do well. The other reason I think we are going to do well is the nature of business in Nassau County. It is very different than it used to be. We don't have the large manufacturers here; Our largest source of revenue is North Shore/LIJ Hospital system. The other two hospital systems are the Catholic Hospital Systems and Winthrop Hospital.
"Second largest employer is government adding in all the schools is 80,000 jobs. Why mention it, because these jobs are not going away."
He mentioned that the plan he put in place for everyone to save money on drugs has been very successful saving $12 million on retail drug prices. All you need is to bring the card, somewere in the back of the room, and drug costs will be saved.
His talk ended and he took a few questions one being why are the parks closing. He said they actually will not be closed, there just won't be personnel to man the parks. He said that perhaps some small museums might close, but nothing has been decided as yet.
There was a discussion about the Nassau Coliseum property and what is being done to develop that property. He said it is important property.
Edward Powers brought up the ongoing debate about ambulances. He said, "In this special district, The New Hyde Park Fire District, there is 24- hour paramedic service in a fly car and that costs the taxpayers and business owners in the area $250,000 a year. Why was this done when we have an EAB (Emergency Ambulance Bureau which the county executive is threatening to privatize) as well as fire department ambulances that back it up and there are not enough ambulances to back it up and there haven't been. So, we decided to protect our own people in our own district. So here is an example of a special district filling the gap of a larger government and this district which had a zero increase in the budget last year and the village we live in had a 2 percent increase.
"Now, you were a mayor so you know that people are in villages because they want to get away from big government and so they can have a say over their own government."
Weitzman said that villages provide different services than county. He said when you compare bigger governments to smaller ones, it's not always a fair comparison. He gave the police department as an example of what the village uses as part of the county service.
Chamber President Richard DeMaetino thanked Comptroller Weitzman for his time and the meeting ended.