Comptroller: County weathers pandemic financial hit in 2020
During theearly dark days of the COVID-19 pandemic, in the spring of 2020, it was easy to be a pessimist when it came to municipal finances.
The economy had been shut down. Malls and other revenue generators for government coffers were closed. Mass layoffs presaged the possibility, as in the Great Recession of 2008, of multitudes declaring bankruptcy and losing their homes, leading to declines in property tax collection. It took many municipalities more than a decade to recover from that financial disaster.
Nassau County leaders acutely felt the effects of the pandemic as they grappled with the fiscal challenges. The county government earns about 40 percent of its revenues from sales taxes, and a report from New York State Comptroller Thomas DiNapoli showed that year-to-year, sales tax collections dropped by 33.8 percent in the county in May 2020. The drop in June was 23.2 percent.
Even as late as last October, in hearings before the Nassau County Legislature, representatives from Nassau County Executive Laura Curran’s budget office were bandying figures of 18 to 20 percent as the expected drop in sales taxes for 2020. The estimates became a bone of contention between the Democratic administration and the Republican Majority, as Curran argued that the expected shortfall necessitated delaying a payment of $75 million in county debt until 2021. The Republican legislators countered that the sales tax collections were better than expected and therefore the payment should be made on schedule.
Ultimately, the payment was delayed, and, as she had promised, Curran delivered a 2021 budget with no tax increase and layoffs and few cuts in services.
Comptroller Jack Schnirman recently released the Comprehensive Annual Financial Report (CAFR) of the county’s finances for the fiscal year ending Dec. 31, 2020. It had good news—the county ended the year with a $128.1 million surplus in its operating funds. The worst-case scenarios had estimated a budget deficit as high as $340 million.
According to Schnirman, “This surplus demonstrates that Nassau County managed the financial challenges brought on by the COVID-19 pandemic, such as declining sales tax and other economically sensitive revenues. The county was able to meet these challenges through effective use of federal funding, debt management and other corrective actions.”
Among the highlights of the CAFR:
• There was an 8.26 percent decline in sales tax revenues from 2020 expected revenues ($105.5 million) due to the COVID-19 pandemic, which had been expected to be much worse—up to a $360.1 million decline in 2020
• Fines and forfeitures were $40 million less than expected, primarily due to decreases in traffic violations—red light cameras, boot and tow, other traffic violations and associated public safety fees
• Departmental revenues declined by $28 million compared to budgeted figures, due to business and public amenity closures. These included a reduction in Nassau Inter County Express (NICE) bus farebox revenues as a result of fare suspension during the pandemic and fewer people using public transportation
• Mortgage recording fees increased by $8.5 million, attributed to the county’s booming real estate market and mortgage refinancings throughout 2020
• Receipt and effective management of $102.9 million in Coronavirus Aid, Relief, and Economic Security (CARES) Act funding
• Lower general fund expenditures, including $17.4 million in salary savings, partially due to hiring slowdowns and a temporary hiring freeze during the pandemic. In addition, recreation and parks expenses were down by $4.9 million as summer programs and events were not held and county utility costs were $2.9 million less than budgeted
• Debt management, including lower debt service cost due to lower interest rates and lower issuance expenditures and the deferral of $75.0 million in principal by one year.
The CAFR noted that the CARES Act had an immediate impact, with the county receiving $102.9 million. “The funds were used in 2020 primarily for public safety personnel expenses incurred during the public health emergency. It should be noted that CARES funding could not be used to replace lost revenues. The receipt and effective use of CARES funding is a major reason the county ended fiscal year 2020 with a surplus.”
Though the county experienced a second wave of the virus in the third and fourth financial quarters of 2020, it did not match the devastating impact on the economy as in the first wave.
The county sales tax revenues had shown strong growth in the years before the pandemic hit and once Governor Andrew Cuomo opened up the economy last summer consumer spending, especially in the fall, was strong and helped to mitigate the ravages of the spring.
“Our [CAFR] shows a clear success in managing an unprecedented financial crisis. Furthermore, the county demonstrated that local government is capable of adaptation and modernization and continued to make progress towards sustainability,” Schnirman said.
Curran said in a statement, “By exercising strong fiscal discipline, and using all the available tools, Nassau County is in a strong position to continue our recovery from the pandemic. I am proud we delivered a third straight annual surplus and believe we are on our way to exiting NIFA’s control period.”
The Nassau Interim Finance Authority, created by the state in 2000 to oversee the county’s troubled finances, imposed a control period in 2011, giving it additional oversight functions. According to its website, it is “empowered to issue its bonds and notes for various county purposes, including the restructuring of a portion of the county’s outstanding debt.”
“It was clear the financial impacts of the pandemic would impact local government finances, but Nassau demonstrated resilience,” Schnirman said. “I would like to acknowledge our county workforce who took steps to effectively adapt to an unprecedented environment, as well as the frontline workers and first responders who are the true heroes among us. The bottom line is this: it is vital that the county continue this progress towards long-term structural sustainability by not squandering the well applied financial lifeboats we have been afforded in 2020. There’s much work still to be done as our recent report lays out, guiding principles for making smart investments with the stimulus funding.”