Officials from Suffolk and Nassau counties in New York said yesterday their deficit bonding plans will likely proceed on schedule despite a recent court order that blocks the debt sales for the immediate future.
The counties' reaction came after last Friday's decision by Judge Harold J. Hughes of the state Supreme Court in Albany, who issued a temporary restraining order last Friday in response to a lawsuit filed by taxpayer activist Robert L. Schulz.
The decision postpones the counties' market entry at least until Aug. 21, when lawyers representing the counties will file arguments asking the court to lift the order.
Mr. Schulz, president of the Glens Falls, N.Y.-based All-County Taxpayers Association, charges in the suit that the deficit bailout plans of the counties, which involve the sale of bonds and an increase in taxes, are unconstitutional. The court order also affects the deficit bonding planned by the town of Huntington.
Last week, Gov. Mario M. Cuomo signed bills allowing nine counties, towns, and a school district to sell deficit bonds to close operating budget gaps.
In a press conference Friday, Mr. Schulz said if the group succeeds in stopping the three deficit bonding plans, the other six would also be blocked.
But to soothe market fears, officials from Nassau and Suffolk said yesterday their deficit bailouts plans will likely still materialize. Municipal market observers and county officials have said derailment of the bond sales and tax increases could deal a serious blow to Nassau and Suffolk's deficit financing plans, and would likely lead to a downgrade in their credit ratings and a possible cash crisis sometime in the fall.
Both counties are attempting to cover large accumulated budget gaps in the 1991 and 1992 fiscal years. They received state legislative approval in late July to carry out their deficit-closing plans.
Nassau County spokesman David Veiser said the county's legislative body, its Board of Supervisors, still needs to officially approve the sale of up to $65 million in bonds with a maturity of up to six years and a new 1% mortgage recording tax. As part of the deal, the county will freeze its property tax level for about year. The vote to implement the plan will likely occur during a Sept. 13 meeting of the group.
On Friday, the board will vote on the issuance of $46 million of budget notes to pay for certain county operating expenses. But the notes, unlike the bonds and the tax increase, do not need state legislative approval.
"If the lawsuit is to be upheld, we would not be able to freeze property taxes," Mr. Veiser said. "But this has no immediate impact because there is no vote on it for at least the next two weeks."
Tim Ryan, a spokesman for Suffolk County, also said the lawsuit will have no short-term impact on the county's finances. He said the county expects to have overturned the court order in time to implement the proposed sales tax increase to 8.5% from 8% by Sept. 1. The county, he said, is in no immediate hurry to issue the $36 million in budget notes the state legislature gave it authority to issue.
"We don't think this will have any effect on us going into the bond market at some future date," Mr. Ryan said. "We are not going to issue bonds until it's absolutely necessary." Mr. Ryan said the county could wait at least a month before issuing the securities.