Bloomberg News

Suffolk Finds One-Shots Hard Habit to Break to Close Deficit

April 03, 2012

Suffolk County (8320MF:US) Executive Steve Bellone has proposed spreading out pension costs to help close a projected $530 million deficit even after a fiscal task force he appointed warned against such “one-shot” maneuvers.

Amortizing the New York county’s 2013 pension payment over 10 years will save $66.8 million, Bellone said yesterday. Last week, Suffolk, where hedge fund billionaires John Paulson and George Soros have homes in the Hamptons beach towns, borrowed $37.6 million to pay for operations. The county declared a fiscal emergency last month after ending 2011 with its first deficit in two decades.

“Clearly, they’re waiting for the economy to come roaring back and pour tens of millions of dollars and new sales taxes” into their coffers, said Lawrence Levy, executive dean of the National Center for Suburban Studies at Hofstra University in Hempstead, New York. “A lot of really hard decisions lie ahead. So far they don’t seem to have made many of them.”

Suffolk’s continued use of one-time revenue to balance its budget underscores how difficult it is for municipalities to take politically painful steps, such as making cuts to popular programs or raising taxes. Since 2008, the county has used $424 million of one-shots, including property sales, delayed pension contributions and proceeds from bonds backed by payments from tobacco companies as part of a 1998 settlement.

The $162.3 million deficit-cutting plan announced yesterday by Bellone and county legislators is only the first phase of a three-part program, said Vanessa Baird-Streeter, a spokeswoman for Bellone.

‘One-Shots’

“It’s going to be a multipronged approach to tackle the projected budget deficit,” said Baird-Streeter. “Everything can’t be a one-shot. But you’re going to have to look at some opportunities that may be one-shots.”

The plan counts on about $32.3 million from new red-light cameras at 50 intersections, a new traffic-violations bureau that will improve ticket collections and measures including a 25-cent surcharge on ferry trips to Fire Island.

Another $58 million in savings will come from operational improvements and withholding 10 percent of department budgets, which is allowed under the emergency decree.

In a March 22 report on municipal defaults, Standard & Poor’s said that four years after the recession began, fewer state and local governments are able to solve their budget gaps by using one-time revenue.

Task Force Warning

“At this point in the economic cycle, finding additional fiscal adjustments with the potential to yield substantial budgetary savings without reducing service levels meaningfully may be politically -- if not practically -- difficult for many governments,” S&P said. “Numerous governments now confront the starker reality of their underlying fiscal structure.”

Last month, a fiscal task force appointed by Bellone, a 42- year-old Democrat and former supervisor for the town of Babylon, criticized the county for using one-time fixes such as borrowing and spreading out pension payments to close deficits during the recession.

“These kinds of budgetary-relief measures do nothing to alter the underlying structure of the county’s operations,” the task force wrote in a report.

Suffolk, which spans 80 miles (129 kilometers) from Babylon to Montauk on Long Island and had a 2010 population of about 1.5 million, was wracked by the bursting of the real estate bubble and the 18-month recession, the longest since the Great Depression. The value of taxable property has declined 16 percent since 2008, according to county bond documents.

Sales Taxes

Sales-tax revenue, which makes up almost half of Suffolk’s budget, has declined about 10 percent from a high of $1.2 billion in 2007 and hasn’t fully recovered. Spending on “economic assistance” has increased 20 percent to $643 million this year from 2006.

Moody’s Investors Service last month cut Suffolk’s general- obligation bond ratings two levels to A1, its fifth-highest investment grade, after Bellone reported that the county’s deficits through 2013 were projected at $530 million.

The plan announced yesterday is only a start, said Levy of Hofstra.

“What would have been better is to come up with a plan that begins to prepare the public for what were truly unthinkable changes that could render county government all but unrecognizable,” he said.

Those changes may include a smaller police force, fewer capital projects and higher property taxes, he said.

Cutting Jobs

Last year, Suffolk’s Legislature passed a budget that rejected a proposal by former County Executive Steve Levy to close a 210-bed county-owned nursing home and cut 450 unrelated jobs. Instead, legislators kept the employees on the payroll for six months.

Bellone has to convince the Legislature that the job cuts are necessary and extract concessions from unions representing about 9,700 of the county’s 10,300 employees, said E.J. McMahon, senior fellow at the Manhattan Institute for Policy Research in New York, which supports lower taxes and less government spending.

Suffolk employees don’t contribute toward their health insurance, said Baird-Streeter, Bellone’s spokeswoman. By contrast, state employees pay as much as 16 percent of the health-care premium for an individual and as much as 32 percent for a family, McMahon said.

“At the end of the day, they need to reduce recurring expenditures,” McMahon said. “It’s always painful in political terms. The sooner you start doing it the less painful it will be.”

To contact the reporters on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net;

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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