* Nassau County control board opposes sewer privatization
* Some Nassau property owners may get tax refunds
* Democratic lawmakers say refund plan is illegal
By Joan Gralla
Sept 18 (Reuters) - A proposed $2.79 billion budget for 2013 for New York's Nassau County delays by a year a plan to raise at least $700 million with a private-public partnership for the local sewer authority but advances property tax refunds, according to documents issued on Tuesday.
The new budget plan is just slightly smaller than the current $2.8 billion budget for the year that ends on Dec. 31.
Mangano so far has failed to persuade state overseers that a public-private partnership for the sewer and wastewater authority will help solve Nassau's long-term financial problems.
Some members of a state control board, created in 2000 to prevent Nassau from going bankrupt, said last month they would reject any budget that included a sewer authority deal because it would only provide nonrecurring revenue. In the past, the control board has favored deeper spending cuts.
Nassau County, located on the western half of Long Island, has failed to capitalize on its wealthy tax base. Its finances have been strained by its over-reliance on often volatile sales tax revenue and hundreds of millions of dollars of property tax refunds it owes due to a faulty assessment system.
Nassau County is going ahead with a novel strategy to handle its backlog of property tax refunds: having private investors purchase them, with the county repaying the investors the principal plus interest over time..
Over the years, Nassau County has issued hundreds of millions of dollars of bonds to pay property tax refunds. Recently, Democratic legislators have declined to approve more borrowing.
Under the new arrangement, property owners stand to get their refunds much sooner - if they voluntarily accept the settlements - while Nassau County cuts the interest payments it owes.
"This settlement provides homeowners with their rightfully owed property tax refund while protecting all taxpayers," Mangano said in a statement.
RPTF LLC, a Delaware limited liability corporation, signed a memorandum of understanding with Nassau County on Sept. 14 for the purchase of about 18,000 tax certiorari judgments valued at a total of $20 million.
One-sixth of the judgments - each of which is worth less than $100,000 - will be paid each Nov. 1 from 2014 to 2019, according to the memorandum.
Nassau County will pay an interest rate of 5.95 percent on the unpaid amount, twice a year, starting from May 1, 2013.
That is just under half of the 12 percent interest rate that Nassau County risked having to pay the property owner, according to a source familiar with the matter. But it is a much higher rate than Nassau County would pay if it had sold tax-free debt to pay the tax refunds, according to a copy of a court settlement.
A Mangano spokesman said the repayments would be ordered by a state court. As they do not involve borrowing or a contract, the state control board does not have to approve them, he said.
Mike Florio, the Democratic lawmakers' spokesman, said the tax refund plan was another bid to circumvent the legislature and the control board.
"This violates the both the County Charter and the New York State Local Finance Law," Florio said.
The Mangano spokesman had no immediate comment on how many judgments the investor might purchase. A source familiar with the matter said only small claims tax refunds were included.
In a statement, Mangano noted his budget plan paves "the way for continued economic growth by holding the line on property taxes for a third year in a row and by restricting spending."
In July, Mangano unveiled a plan to close a projected $45 million gap in the current budget through cutting jobs and raising a laundry list of fees, including some charged to process traffic tickets.
Mangano's new 2013 budget plan is balanced - but Florio said it adds approximately $14 million of "job-killing fee increases."
The new fees, for example, require appliance, scrap and precious metal dealers to pay $500 licensing fees every other year. Park and recreation fees also will climb.
Mangano's multi-year financial plan projects that the 2014 budget will have a nearly $67 million gap, followed by a $74 million deficit in 2015 and a $92 million gap in 2016.
Privatizing the sewer system is expected to raise a total of $80 million in 2014 and 2015 to help close those gaps, according to the budget documents.
In 2016, labor concessions alone would generate total savings of $40 million.