The Nassau County Interim Finance Authority will remain in control of Nassau County, N.Y.’s finances, as a judge Monday rejected the county’s request for a temporary injunction to stop NIFA’s supervision.

The agency has asked the Long Island county to file a revised financial plan within five days. NIFA implemented a control period in late January after it found the county’s $2.6 billion fiscal 2011 budget to have a deficit of more than 1%. Such a shortfall requires the authority to begin a control period. Fiscal 2011 began Jan. 1.

In response to New York Supreme Court Judge Arthur Diamond’s decision to deny Nassau’s temporary injunction, County Executive Edward Mangano and NIFA chairman Ronald Stack plan to meet this week to help craft “appropriate initiatives that may be included in the financial plan.”

The county’s attorneys are reviewing the court decision to determine how to move forward, a Mangano spokeswoman said.

One issue is the county’s practice of selling bonds to pay for property-tax refunds. In the past, it has used funds from the operating budget and bond proceeds to pay the refunds. Under Mangano’s plan, bonds would cover all of Nassau’s refunds this year and next, with the goal of ending such borrowing in 2013.

“Democrat legislators and NIFA, both of whom supported over a billion dollars in borrowing, want to completely end this practice and change the accounting rules,” Mangano, a Republican, said in a statement. “Therefore, I am deeply concerned with the judge’s action to allow NIFA’s rule change, which presents a serious burden to our taxpayers.”

Diamond’s ruling acknowledged that NIFA’s review appears to be “more stringent” this year than in previous years, but he said the government may face a shortfall above 1%.

“Even when adjusted so as to allow certain revenues or savings which NIFA deemed risky, some of which were identified post-submission of the budget, a likelihood of a deficit greater than 1% remains,” Diamond wrote in his ruling. “In fact, even the county’s own comptroller and Independent Budget Review Office have forecast similar deficits.”

In a statement, NIFA’s board said that it is pleased with the judge’s ruling and that it is confident a control period will prevail if Nassau continues its litigation. A control period involves NIFA overseeing the county’s borrowings, spending contracts, and requesting potential wage freezes and new fiscal strategies. It does not have the ability to raise taxes or impose layoffs.

Moody’s Investors Service last month placed the county’s $1.4 billion of outstanding general obligation and GO-backed debt on negative review due to the legal challenge. It rates the credit A1.

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