12:01am

Wed January 19, 2011
Economy

Nassau County: Jazz Age Enclave Hits The Fiscal Skids

F. Scott Fitzgerald set his classic Jazz Age tale of American wealth and ambition, The Great Gatsby, amid the elegant North Shore estates of Nassau County on Long Island. And though the county has changed a lot since then, it's still one of the wealthiest places to live in the country.

Drive its streets and you pass through modest, middle-class enclaves where all the houses look alike (the county is home to Levittown) but also through comfortable, tree-lined neighborhoods where homes routinely sell in the millions of dollars.

Today, the median household income in Nassau County is over $93,000 a year, making it the 11th richest U.S. county.

But sometime this week, Nassau County could suffer the same fate as some much less affluent places, losing control of its finances to a state-appointed board, the Nassau County Interim Finance Authority (NIFA).

A Financial Hole

Critics say the suburban enclave has been digging itself into a financial hole for years, overestimating revenue and underestimating expenses, spending lavishly on municipal salaries and services and borrowing to pay for them.

"Even without the recession hitting the county as hard as it did, the county was still on a trajectory where it was spending more than it was taking in," says Lawrence Levy, executive director of the National Center for Suburban Studies at Hofstra University in Hempstead, N.Y.

The recession has greatly aggravated the county's troubles -- driving down sales tax revenue and leaving officials with few good options to address the problem.

High Taxes

County officials say tax increases are off the table. Property taxes in Nassau County are already among the highest in the nation.

"It's the biggest single expense that we have," says Frank Russo, a retired manager at AT&T. "Nothing else comes close to it."

Russo pays nearly $16,000 in property taxes a year on his Port Washington house, which is assessed at $750,000.

The taxes are driving many people out of Nassau County, says George Maragos, who was elected county comptroller in 2009.

"We have a net outflow of people and businesses from the county," he says. "We need to make it more attractive for young families to live here."

Balancing The Budget With Salaries Topping $100,000

Not only have officials ruled out tax increases, they actually eliminated an unpopular energy tax not long after taking office, costing the county about $40 million a year and making a bad budget situation worse.

In September, the Interim Finance Authority issued a report that was sharply critical of county officials, saying their budget did not meet "the standards of prudence necessary for us to project budget balance."

Moody's Investor Service subsequently downgraded Nassau County's debt. The authority has now given the county until Jan. 20 to prove that its 2011 budget is balanced. If it can't, the authority can take control of county finances, giving it the power to write a budget and approve borrowing and contracts.

"You'd have unelected officials making judgments about who to penalize and who to tax," Maragos says. "And we think that's unfair and inappropriate and somewhat undemocratic."

The chairman of the authority's board, Ronald Stack, did not return calls seeking comment.

County officials insist that the budget is balanced and that Nassau County can solve its problems, if municipal unions will agree to wage and benefit cuts. The county pays some of the highest wages in the country, with many police officers earning more than $100,000 a year.

Eliminating Public Golf Courses, Rifle Range

But if unions won't go along with proposed cuts, Nassau County will have to begin slashing its budget. The county comptroller, Maragos, says Nassau provides lots of services, such as public golf courses and a rifle range, that can be eliminated.

"It may have been great some years ago when there was a lot of money, as an additional service to the public, but is it something the taxpayer will want to pay for and subsidize?" he asks.

Others worry that the cuts would end up hurting those who can least afford them. Nassau County funds a large network of programs for the elderly, children and the needy.

"I think, historically, what we have seen is the low-hanging fruit be the first target [of budget cuts], and very often the low-hanging fruit is social programs," says Gwen O'Shea, president and CEO of the Health and Welfare Council of Long Island. Many programs have already seen their budgets cut because of reductions in federal and state funding, she notes.

A Park On Every Block?

Others aren't so sure residents will be willing to tolerate cuts.

"County government is facing the same thing that state and federal governments are facing," says Levy, the head of Hofstra's Center for Suburban Studies. "They have voters who love their services. They want a cop on every corner. They want a park on every block. They want to know that the bus is going to come when the bus is supposed to come. But if you say, ‘OK, great, we've got to raise your taxes three or four or five percent,' they'll vote you out of office." Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.