Nassau County, N.Y., experienced a 9% decline in sales tax revenues in the first half of 2014.
County Comptroller George Maragos said the decline amounted to $48 million from the same period in 2013. "At the end of the first quarter, we projected over $70 million less in sales tax revenues due to flat consumer income growth and shifts to online purchasing," Maragos said. "The impacts of these trends now appear pronounced and may be long lasting. This will be a real blow to the 2014 budget and to the multi-year plan."
Sales tax revenues account for 42% of the county's budgeted revenues.
"The administration and the Nassau Interim Finance Authority must take immediate action to deal with this significant shortfall in projected revenue which is exacerbated by the increased costs from the recent labor settlements, and the county's continued overtime overrun. Failure to act will be dire to the county's plan to fiscal stability."
The county has a history of overestimating sales tax receipts, said Howard Cure, director of municipal research at Evercore. The Nassau Interim Finance Authority, which currently acts as a control board for Nassau County, has limited these overestimates in recent years, he said.
Timothy P. Sullivan, the deputy county executive for finance, said actual sales tax revenue have come in ahead of estimates every year starting in 2010.
Nassau County Budget Director Eric Naughton, who works for County Executive Edward Mangano, was more optimistic than Maragos and Cure.
"I have questions regarding the calculations in the first instance and have taken steps to review the sales tax payments business by business," Naughton said. "In addition, should the calculation be correct, Office of Management and Budget and Office of Legislative Budget Review believe the figure is a $50 million impact on the budget which will still provide Nassau with a slight surplus at year's end."
Maragos said he believed if trends continue, Nassau will receive $91 million less in revenues this year than expected. Nassau's fiscal year corresponds with the calendar year.
Nassau County is rated A2 by Moody's Investors Service, A by Fitch Ratings, and A-plus by Standard & Poor's.
In late May Moody's affirmed the rating. Moody's analyst Robert Weber said challenges included the county's negative net cash and investments, limited financial reserves and a trend of structurally imbalanced operations. Weber also noted the county exposure to economically volatile tax revenues. Finally, he pointed to the county's exposure to NIFA's and Nassau Health Care Corp.'s substantial variable rate debt and swap portfolio and dependence on substantial cash flow borrowing.
For strengths, he listed NIFA's oversight, a large and diverse tax base, and a strong socioeconomic profile.
