The Nassau County Interim Finance Authority for the first time imposed a control period on Nassau County, N.Y., Wednesday.
The control period gives the NIFA board the power to approve all borrowings, freeze wages, review and approve all new contracts, require new financial plans, and direct the county to implement them.
NIFA imposed the control period because it found that the county’s budget gap for fiscal 2011 was greater than 1% under generally accepted accounting principles.
“This was not something that the law gives us any latitude [on],” said NIFA chairman Ronald Stack.
“Once we find such a gap we are mandated — the legislation says 'we shall impose a control period.’ ”
The six-member board unanimously approved imposing the control period after Stack read the resolution to the board at a public meeting in Uniondale.
Stack said that the county’s $2.6 billion 2011 budget has a $176 million deficit under GAAP. Under cash accounting, the county has a $50 million deficit, Stack said.
The county, located on Long Island, is required to submit a revised financial plan by Feb. 15 that does not include certain revenues, cost-saving initiatives, and contingencies that NIFA deems risky.
The authority does not have the power during a control period to lay off employees or raise revenues, Stack noted.
“We do not take action,” Stack said. “We work with the county and ask them to take proper action.”
County Executive Ed Mangano, who was not at the meeting, said he could respond with legal action.
“While I respect the role NIFA is supposed to play, it is clear they do not intend to use their powers to truly save taxpayers money,” Mangano said in a news release. “Today’s action is unfounded and premature since NIFA’s determination of county finances is not in compliance with the law nor is it consistent with the spirit of the law.”
Mangano, a Republican, said he would “take the necessary legal steps to protect our residents from property-tax increases.”
Nassau County attorney John Ciampoli called NIFA’s move “astonishing” and said he would consult with Mangano over possible legal challenges.
The county’s practice of borrowing to settle tax certiorari claims — legal challenges to property tax assessments — has long drawn NIFA’s ire and was one of the reasons for the agency’s creation in 2000. Stack declined to comment on whether the board would block future borrowing for tax certiorari payments.
NIFA documents presented at the meeting pointed to a decline in the county’s reserves from 2004, when they were at $285 million, to $65 million by the end of 2010.
Asked whether the move was politically motivated — the board did not impose a control period when former County Executive Thomas Suozzi, a Democrat, was in office — Stack pointed out that NIFA included three Democrats, a Conservative Party member, a Republican, and an Independent.
“It is not partisan, it is not political,” he said.
The control period will stay in place until the budget is balanced, according to Stack.
In November, Nassau received its first downgrade in a decade when Moody’s Investors Service lowered its GO debt to A1 from Aa3.
Moody’s retained a negative outlook on the credit, citing weak liquidity and increased dependence on non-recurring revenue.
New York State created NIFA in 2000 to issue bonds and oversee county finances at a time of fiscal crisis.
The authority has never implemented a control period and no longer has the authority to issue new-money bonds.