Debt refinancing concerns hampering Nassau County budget process
Nassau County, New York, Executive Laura Curran's goal for an early 2021 budget approval has hit a stumbling block: stiff opposition from legislative Republicans toward her debt refinancing proposal that is a key component of her $3.3 billion spending plan.
Curran vetoed budget changes the GOP-controlled county legislature sought in her $3.3 billion spending proposal since they removed a debt-restructuring plan that would produce an estimated $285 million of interest savings next year. The Democratic county executive’s proposed 2021 budget hinges largely on refinancing outstanding bonds through the triple-A-rated Nassau Interim Finance Authority.
“My administration carefully crafted the proposed budget to ensure that critical county services would continue and that county workforce levels would be maintained as we recover from the impact of the COVID-19 pandemic and the associated economic downturn,” Curran said in a statement. “These are unprecedented times, but by restructuring NIFA and county debt with new bonds at historically low interest rates, Nassau will be able to keep essential services fully funded throughout this pandemic.”
The veto came Thursday, shortly after county legislators in a party line 10-8 vote approved Republican amendments, which did not change the overall size of the budget. Republicans can now seek to override the veto, which would require a super majority of 13 votes. Curran said she has the support of all eight Democratic members to block an override.
As of Friday afternoon, Republican legislators had not yet scheduled a vote to try to override the veto.
Curran is seeking to finalize a budget soon in order to give NIFA ample time to review it. NIFA must approve all Nassau budgets under a control period the state-appointed panel implemented in 2011.
Legislative Presiding Officer Richard Nicolello, R-New Hyde Park, and other county Republicans opposed refinancing efforts, saying this approach would only delay confronting the county’s fiscal challenges while also extending the life of NIFA’s debt. NIFA, which began in 2000, has $411 million of outstanding county debt that is scheduled to be paid off in 2025. It was given increased bonding authority under the 2021 New York State budget signed by Gov. Andrew Cuomo extending its oversight powers to 2051 from 2025, if needed.
Nicolello said in a statement Curran's refinancing plan would burden county taxpayers "with millions of dollars in additional debt for decades to come."
NIFA hired Goldman Sachs in June to lead a potential restructuring effort.
Curran is also seeking legislative approval to refinance additional county and NIFA debt for an estimated $150 million of debt savings in 2022. S&P Global Ratings credit analyst Nora Wittstruck said refinancing Nassau’s debt through NIFA would make sense given the interest savings that would be achieved from the agency’s triple-A ratings.
Nassau’s general obligation debt by comparison is rated A-plus by S&P, A2 by Moody’s Investors Service and A by Fitch Ratings.
The suburban county on Long Island faces a projected $385 million budget gap for the current fiscal year ending Dec. 31 and another $364 million deficit in 2021.
Curran also said in her veto announcement that county Republicans are inflating projected sales tax revenues, which her administration projects will decline 20% next year. The Nassau GOP is forecasting a 12% drop based on its own analysis.
“From our perspective a more conservative view of sales tax projections in 2021 is a better way to go,” said Wittstruck noting sales tax collections comprise around 40% of the county’s total revenues. “There is still a tremendous amount of uncertainty with the virus that makes projecting sales tax revenue very difficult.”