Last week’s downgrade of Westchester’s financial ratings may not have come as a surprise to County Executive George Latimer but that doesn’t make the challenge of balancing the 2019 budget and rebuilding the county’s evaporating fund balance any easier.
On Nov. 27, it was announced that ratings agencies Standard & Poor’s and Fitch had adjusted the county’s long-established AAA rating to AA+ while Moody’s downgraded the county to AA1.
Following seven years of zero tax increases under former county executive Rob Astorino and the results of a state comptroller’s audit released in September showing Westchester was one of the most fiscally stressed governments in the state, immediate action was needed. Earlier in the year the county rating was still AAA but was assigned a negative outlook.
In an interview with The Examiner last Friday, Latimer said his goal over the next three years is to restore the fund balance from its current projected $70 million at the end of 2018 to the more than $140 million that would return it to the desired 8 percent of the operating budget. He also plans to restore the AAA rating by the end of his term.
“The basis for doing that is to show the ratings agencies that we have a commitment to steady revenue, that we move away from one-shots and bonding for certain uses and that we have a stable fiscal management team,” Latimer said.
Latimer has proposed a 2 percent tax increase that would account for $11 million of the $71 million budget gap. He said other potential revenues that could be realized in 2019 is if the state legalizes sales tax on Internet purchases, a move that could raise about $6 million for Westchester; hope that the state legalizes sports betting and/or the use of recreational marijuana that would net an undetermined amount of money; mulling an increase in sales tax from the current 7.375 percent (of which 4 percent is state sales tax); and impose new fees for Airbnb and surcharges for Uber and Lyft.
More than $8 million will be bonded to pay for anticipated tax certioraris. A temporary hiring freeze has also been proposed that will leave an increasing number of vacancies as some workers retire during 2019.
He said options are limited but using fund balance is off the table. Any additional revenues would be placed toward rebuilding the reserve fund.
“The opportunity to do things are mostly over time because we didn’t get from AAA to AA1 in a year,” Latimer said. “It took a number of years of a consistent policy, which is what the bond rating agencies were concerned about.”
The potential for the most controversy is the proposed transfer of the County Center parking lot to Westchester’s Local Development Corporation (LDC), yielding the county a projected $22 million, not including the loss of about $2.5 million in annual parking revenues. Some legislators and critics have compared the proposed move as a one-shot revenue source similar to Astorino’s aborted Westchester County Airport privatization plan, while others are concerned about the loss of parkland.
A series of approvals would need to be obtained for the transfer, but Latimer said that no action would be taken before July 1 to give the county time to see what the state legislature does regarding fresh revenue streams.
“If we can get additional revenue from any one of those sources, then we don’t need to do the deal,” Latimer explained “We can take that off the table. I’m very comfortable about saying that the deal itself has been compared to the airport deal and it’s not like the airport deal.”
First, there will be no change in use, Latimer said. The lot will continue to be where vehicles are parked. It will also remain in Westchester’s domain. As a result, there is the potential it could be leased back to the county at some point, he said.
One critic, however, Board of Legislators Minority Leader John Testa (R-Peekskill), said that the airport deal and Playland were examples of smart public-private partnerships that would have provided the county with the necessary money to stave off a credit downgrade.
“For the past year I have urged the county executive and my Democrat colleagues on the Board of Legislators to avoid future credit downgrades by embracing smart, ongoing revenue sources like private partnerships at the County Airport, Playland and the North 60 biotech development,” Testa said. “These are important projects that have apparently been scrapped in favor of one-shots like selling off a parking lot in parkland.”
Another veteran legislator, Michael Kaplowitz (D-Somers), who was noncommittal on the parking lot transfer, said the credit downgrade came as a result of Astorino’s unwillingness to agree to even 1 percent tax increases, a roughly $37 annual bump for the average household.
“But he refused to do it and now we’re paying the piper,” Kaplowitz said. “Our reserves are well below the percentages we should have. The AAA rating has gone away and the ratings agencies have finally woken up to what’s happening.”
Despite the financial storm clouds, Latimer said he is confident that the legislature and Gov. Andrew Cuomo will approve some new revenues starting in 2019. Latimer also said that while the days of no tax increases are gone, he pledged that future budgets will be tax cap compliant.
Cost certainties are also in place through 2021 with the recent settling of the CSEA contract.
As the Board of Legislators works on the budget this week with a tentative adoption set for next Monday, Dec. 10, Latimer said sound fiscal approaches, rather than a political ideology, will bring Westchester back to full fiscal health.
“We gave them a budget that is balanced, we gave them a budget that does not go into fund balance, we have them a budget that does not slash and burn the staff, we gave them a budget that give them a 2 percent property tax increase,” he said.
The final public hearing on the 2019 budget is scheduled for this Wednesday at 7 p.m. at the County Building in White Plains.