The Nassau Interim Finance Authority voted Thursday to refinance up to $1.4 billion of existing county and NIFA debt in a bid to save Nassau $435 million over two years as it faces the economic fallout from the coronavirus pandemic.
Directors of NIFA, a state board that controls the county’s finances, approved the deal Thursday night by a 4-0 vote.
The plan would save Nassau $285 million in debt service in 2021 and $150 million in 2022. NIFA and county officials said refinancing was needed to avoid massive budget cuts and layoffs of staff.
In December, the Nassau Legislature authorized NIFA to refinance the county’s debt.
It took months for Republicans, who control the Legislature, to agree to allow NIFA to refinance the debt. After months of negotiations, Republicans finally agreed to grant NIFA permission, known as a “statement of need.”
County and NIFA officials have strongly advocated for refinancing. NIFA has a higher credit rating than Nassau, giving it access to better interest rates. NIFA would carry Nassau’s debt until 2035.
NIFA President Adam Barsky said in an interview, “this may be one of the most significant deals Nassau County has ever had.” In 20 years, he said, this could be seen as defining “how they emerge from the pandemic in unprecedented times.”
“This will be the lowest rate the county has ever seen in its history, and that’s also true for NIFA,” Barsky said earlier Thursday.
NIFA has not been able to refinance the county’s debt since 2007. State legislation, approved last spring, allows NIFA to restructure the county’s debt through 2021. The bonds must arrive at due no later than 2051.
Republicans had balked at the proposal, fearing that extending NIFA’s debt would also prolong the council’s existence for decades to come.
But NIFA officials have received a legal memo from outside counsel, Skadden Arps, that NIFA can stay until 2051, as long as it is financially prudent.
On Thursday, Fitch Ratings gave NIFA bonds a triple-A rating, the highest rating level. This designation reflects “lowest expectation of default risk”.
The state legislature created NIFA in 2000.
By restructuring the bonds, Nassau and NIFA will make smaller debt payments to creditors over the next two years, but larger payments in the years to come.
The restructuring will free up dollars for Nassau to use to fill budget holes.
With NIFA able to defer large debt payments, it can provide more sales tax revenue to the county.
NIFA has the first claim on sales tax owed to Nassau and uses it to fund its operating budget and debt before providing the rest to the county.