Nassau County, N.Y., faces significant one-time and recurring expenses due to a recent court decision that Moody's Investors Service says is a credit negative.
Under the ruling from New York's highest court, Nassau County will remain responsible for a greater variety of property tax refunds than it had wanted. Moody's assistant vice president Robert Weber estimated the annual tax refund expense at $60 million, equal to 2.2% of the county's 2012 revenues.
The county hasn't been paying the localities for the tax refunds recently and had accumulated a $298 million tax refund liability as of the end of 2012. This was 10.7% of operating revenues. Since then the sum has increased
"Property tax refunds occur when property owners successfully challenge their assessments and retire a refund of excess taxes already paid," Weber said. "Unlike other New York counties, Nassau County covers the refunds not only for its own small share (approximately 17%) of total property taxes, but for the larger share of its component local governments." The New York State Court of Appeals ruled that the county could not withdraw its support of the localities on this point.
Nassau County is rated A2 by Moody's, A by Fitch Ratings, and A-plus by Standard & Poor's.
While the decision was a credit negative for Nassau County, it is credit positive for the county's localities, Weber said. Some of the local governments most likely to benefit include A1 rated Hempstead Union Free School District, A2 rated Oyster Bay, and Aa1 rated Washington Union Free School District.
