New York's Suffolk County, fighting against time to avoid running out of cash, plans on selling $90 million in debt to put its finances in order, but it still has several hundred million dollars in short-term payments due later this year.
The county, home to the expensive Hamptons beach communities that attract millionaires from New York and around the world, faces a crisis brought on by years of financial mismanagement.
The sale of revenue anticipation notes will be the first in decades.
County Executive Steve Bellone said on Wednesday that without structural changes, "we are on the path to bankruptcy," and without the note sale, the county will not be able to pay workers and maintain services.
Bellone said he wants Suffolk County to avoid a takeover by New York state, which has already happened to Nassau County, located west of Suffolk on Long Island.
"My goal is to do everything we can to avoid that," he said.
The county is also planning layoffs and wants to reach concessions with union workers to cut costs.
"We rarely see deficits of this magnitude and they could result in painful service cuts," said a spokeswoman for New York State Comptroller Thomas DiNapoli, a Democrat. "My office stands ready to assist them in determining the extent of their fiscal problems and to help identify potential solutions."
A sale of $90 million in short-term revenue anticipation notes may be just a temporary salve. According to Electronic Municipal Marketplace Access, about $465 million in Suffolk County short-term tax anticipation notes come due in July and September.
A panel said Tuesday that Suffolk County faces a three-year $530 million deficit, prompting Bellone, a Democrat, to declare a financial emergency.
The county has a median household income of $81,551 versus the nationwide average of $50,046.
"We have the potential for incredible growth here," Bellone said. "This is largely a financial problem of the government's making. It's going to involve some difficult and painful decisions for sure, but if we don't address it now, the problem will get worse."
Bellone said layoffs, concessions and so-called payroll lags will all be discussed. Payroll lags defer some salary from every pay period, so workers are not paid for two weeks of their salaries until they retire or find jobs in the private sector.
Suffolk County's spending has exceeded revenue since 2008, Bellone said. The budget hole was masked by $424 million of one-shots, or nonrecurring revenue, he explained.
Suffolk County's budget, on an all-funds basis, totals just over $3 billion, according to Moody's Investors Service.
The county of 1.5 million people is one among the list of U.S. municipalities whose finances have hit a wall, which has at times unsettled the $3.7 trillion municipal bond market.
Stockton, California, for example, plans to skip $2 million of bond payments to tackle its budget deficit and stave off a bankruptcy, while Alabama's Jefferson County is in the midst of the biggest U.S. municipal bankruptcy proceeding in history due to a faulty financing scheme for a sewer plan.
(Reporting by Joan Gralla; Editing by Jan Paschal)