Nassau County “Taxpayer Relief” Controversy
(Long Island, N.Y.)On Jan. 20th, 2011 New York State’s Nassau County Interim Finance Authority (NIFA) will assess the $2.6 billion budget proposed by Nassau County Executive, Edward Mangano. The budget must be balanced and the county debt must not increase more than 1% from $343 million to be maintained by the current county legislature. If Mangano’s budget fails inspection, New York State could be running Nassau County in 2011.
With the unemployment rate at 7% in Nassau County, and the deficit at its largest in county history, Long Islanders are asking who’s to blame for the near bankruptcy. Extreme problems with finances date back to the Gulotta administration when the county practiced the policy of borrowing money to compensate for county revenues not increasing at the same rate as county expenditures. The Suozzi administration that came later inherited the habit despite campaign promises, and increased spending without raising the property tax. This practice gave taxpayers the illusion of financial calm while the county’s debt hit ultimate highs on the brink of bankruptcy.
Mangano inherited the state of the County in a similar way that President Obama was left with the economic problems of the nation amidst recession. Both needed to do something about healthcare expenses, as well as providing a feasible cure to a preexisting, outrageous deficit. Mangano began to fight the deficit by repealing the Home Energy Tax. He then created $148 million in department cuts, and gave retirement incentives to county employees. In his Tax Payer Relief Act, he proposed creating public-private partnerships to help solve the problem of the Sewer District, which adds $28 million to the debt. Not-for-profit agencies, such as churches, benefit from the original policy that awards them free service.
The heart of the issue has to do with the County Guarantee Policy that has been in practice in Nassau County for decades. Nassau County is the only county in America to have a County Guarantee, which offers taxpayers full property tax refunds for over-assessments made by the county. Even though the county only collects 20% of the property tax (65% goes to the school district) they pay back the entire amount. This is a problem because commercial taxpayers petition the county for refunds with zero-liability on a regular basis, causing over a billion dollars in debt with $150 million dollar a year interest.
Mangano’s plan is to eliminate County Guarantee in the Common Sense Act, making the county only responsible for the amount they have wrongfully collected. The end result would be no property tax increase for 2011 from Nassau County. While this is fair, the flip side is that the school districts would then be responsible for paying the rest of the refund, and in ways, assume the burden of the billion-dollar-debt. There is also the question of whether the county would have much incentive to fight the petitions for refunds or simply pass them onto schools. Mangano also expressed the desire to transport the burden of making tax assessments from the county to the towns.
The bigger question is what will happen in 2013 when County Guarantee is to be abolished. It’s supposed to save taxpayers money and end borrowing, but many suggest that the schools will raise taxes in response to increased expenses, which isn’t quite the “minimal impact” the Mangano administration suggested. The school districts would have to set up reserve funds to have “back up” money when the time comes to pay refunds. Nonetheless, the borrowed money and debt from the broken tax assessment has amounted to nearly $1.6 billion, as property tax increases at high rates annually.
Future problems for Mangano’s budget come from the inability to accurately factor the increasing unemployment and foreclosure rates. Nassau County gets much of its revenue from sales tax which is bad news in a recession. There was a $20 million increase in NYSHIP Health Insurance and severe increases in pension rates. Some have suggested proposing an income tax in Nassau County, but that may only cause Long Islanders to move to different suburbs of the city. Perhaps if Nassau County officials found an inexpensive way to assess taxes correctly, they’d eliminate the root of the problem.