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Nassau County Comptroller’s Report: June 21, 2013

Last week my office released the County’s 2012 year-end unaudited fiscal results and reported that the County is expected to end with a budgetary surplus of $41.6 million. The audited results are expected to be released by June 30, 2013. These results include $9.7 million in unanticipated costs representing the County’s 10% portion of Superstorm Sandy related expenditures. The surplus will now go to replenishing our reserve fund, which will increase to approximately $82 million.

The 2012 budgetary surplus was achieved by controlling expenses, refinancing debt at lower rates, imposing a nonessential hiring and wage freeze, and challenging property tax grievances.  The improving economy also helped by increasing sales tax income, which is the biggest source of County revenues.

Although the County manages and reports on a budgetary basis, it also reports its year-end results in additional accounting methods as required by various regulatory organizations. Under Generally Accepted Accounting Principles (“GAAP”) as required for governmental financial reporting, the County’s unaudited results end with a surplus of $28.8 million. Under a method prescribed by the Nassau Finance Interim Authority (NIFA) which excludes other financing revenues, the County expects to end 2012 with a negative $85.5 million.

In each of these methods, however, the County performance has improved since 2009 under the previous Administration. On a governmental GAAP, the County result has improved by 150%. On a NIFA presentation, it has improved by 54% compared to the negative $184.3 million recorded in 2009.  

The Structural Gap, which has been used historically to measure the financial health of the County, has also continued to improve for the third consecutive year. The Structural Gap has progressively declined to $115.5 million from $251.6 million in 2009, a 54% improvement. The Structural Gap is the difference between recurring revenues and expenses, and excludes non-recurring items that are customarily used to arrive at the budgetary balance, such as borrowings, and extraordinary items.

The amount of new borrowing by the County during 2012 was held at $191.7 million, approximately 40% less than in 2009. This borrowing was used primarily for termination pay and capital projects.

Continuing the financial improvements will present major challenges to the County going forward. State mandates will continue to present increasing burdens to the County and all other counties unless Albany takes action to control the ever-growing costs associated with Medicaid, pensions and unfunded mandates. The improving economy will help but it is not expected to generate sufficient additional sales tax revenues to offset these rising costs. Additionally, the wage freeze court challenge and the growing property tax liability are additional risks that may have an impact to the County’s operations going forward and must be addressed by the Administration and the Legislature in the 2014.

On a positive note, however, the estimated new property tax liabilities added in 2012 were $58 million, the lowest since 2008, and highlights the improvements in the Assessment System introduced with the Four Year Cycling Assessment Formula.