Nassau County budget nears NIFA approval with $473M refinancing deal
New York’s Nassau County is nearing the finish line on adopting a 2021 budget after lawmakers reached a compromise on a debt refinancing proposal.
County Executive Laura Curran’s $3.3 billion budget proposal, which will be considered by the Nassau Interim Finance Authority for approval Thursday, hinges largely on triple-A-rated NIFA refinancing $473 million of existing debt over 15 years and also restructuring its own bonds.
The Republican-controlled Nassau County legislature gave NIFA formal authority for the borrowing plan after previously oppposing Curran’s original 30-year refinancing proposal. The revised 15-year refinancing is projected to generate $435 million in debt savings through 2022.
“Although we do not view the debt restructuring as a long-term solution to maintain budgetary balance, we view positively the near-term debt service savings generated by the restructuring to help alleviate uncertainty associated with the pace of the economic recovery on Long Island in fiscal years 2021 and 2022,” said S&P Global Ratings credit analyst Nora Wittstruck. “We are continually monitoring the county’s credit profile to assess the risks it faces as a result of the pandemic.”
Nassau’s general obligation debt is rated A-plus by S&P, A2 by Moody’s Investors Service and A by Fitch Ratings. The count's credit outlook is negatice by Fitch and stable from S&P and Moody's.
Curran spokesman Mike Fricchione said, “This deal is a testament to bipartisan cooperation and the recognition that this crisis can only be weathered by working together. The declaration of need now paves the way for both the County and NIFA to responsibly refinance debt at historically low interest rates so that the County Executive has the resources to lead us out of this pandemic.”
NIFA hired Goldman Sachs this past June to lead a potential restructuring effort.
NIFA, which was formed in 2000, has $411 million of outstanding county debt scheduled to be paid off in 2025.
The county’s October budget report said $75 million in debt savings are anticipated in 2021 to help plug a $385 million budget gap. The budget also includes $69.5 million of savings from eliminating 329 vacant positions and other cost-cutting measures.
Wittstruck cautioned that Nassau faces “a high degree of uncertainty” with revenues heading into 2021 because of unknowns of how COVID-19 pandemic will develop in the coming months. She said S&P is assessing Nassau’s credit outlook on the assumption that the COVID-19 vaccine provides effective immunization to help spur a return to normal economic actiity by mid-2020.
Curran has projected a 20% decline in sales tax collections in 2021 due to the pandemic. The sales tax makes up about 40% of Nassau’s total revenues.
Legislative Presiding Officer Richard Nicolello, R-New Hyde Park, said in a statement that changing the refinancing terms from 30-year bonds to 15-year bonds will save taxpayers $683 million. Nicolello noted that the Curran administration also agreed to a provision enabling the county to pay off the debt before the 15-year maturuty date.
Nicolello added that the refinancing deal brokered with Curran also involves an agreement by the county executive to esablish a “special revenue fund” for sales tax receipts that are in excess of 2021 estimates. He said the fund would be decicated toward paying back tax refunds owed to businesses.