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Suffolk County Can Tap Fed's Stopgap Fund

Thu, 04/30/2020 - 10:40

Suffolk County can benefit from the Municipal Liquidity Facility, a $500 billion fund set up to provide a borrowing stream to help the country’s most densely populated areas, following the Federal Reserve’s expansion of eligibility requirements.

The fund is intended as a stopgap in the case of income tax deferrals and extensions, increased expenses resulting from the pandemic, and decreasing tax revenue. The money can be used to make principal and interest payments to holders of municipal debt.

Initially, only counties and cities with a population of two million or more could apply for loans. At 1.48 million residents, Suffolk did not meet that threshold.

Speaking to the press on Tuesday, Suffolk Executive Steve Bellone said the Federal Reserve had announced the expansion of eligibility on Monday evening. That move followed Mr. Bellone’s letter to Treasury Secretary Steven Mnuchin last week, in which he explained that help from Washington would be critical to assuring the stability of Suffolk’s 10 towns, 71 school districts, and 110 fire districts, among others, if property owners fail to make tax payments.

“Suffolk County is not only one of the largest counties in the country, it’s also one of most heavily impacted,” Mr. Bellone said. “That was the case we were making.”

Suffolk’s eligibility for loans from the Municipal Liquidity Facility “gives a huge shot in the arm to efforts to provide property tax relief to homeowners who have been impacted economically by Covid-19. It means Suffolk County has played a prominent role in moving national policy.” The fund “gives Suffolk County the ability to do short-term borrowing to address cash flow issues caused by revenue almost completely drying up because of the wholesale shutdown of certain parts of our economy,” Mr. Bellone said.

The Suffolk County Tax Act, which Mr. Bellone described as “a little-known provision of state law that is more than 100 years old,” would have impeded the county’s ability to provide temporary property tax relief to impacted property owners. The law “means that property taxes paid to towns in December and January do not get paid to the county until more than halfway through the year. This creates all sorts of issues, costs the county taxpayers, and is, importantly in this situation, the thing that is and has been the biggest obstacle to providing that temporary property tax relief.”

Mr. Bellone credited Senator Charles Schumer and Representative Lee Zeldin with persuasive advocacy for Suffolk. Mr. Schumer “literally walked the letter into Steven Mnuchin’s office,” he said of his letter to the Treasury secretary, and spoke with Jerome Powell, the chairman of the Federal Reserve. Mr. Zeldin lobbied President Trump and Mr. Mnuchin, Mr. Bellone said, “and the congressman put me on the phone, set up a call with the Treasury secretary and himself so I could make the case directly about why Suffolk County needs this and why this is so important.” 

He also thanked members of the state’s congressional delegation “who also fought for this”: Representatives Tom Suozzi, Peter King, and Kathleen Rice. “They fought and sent a support letter as well,” he said, as did the county’s town supervisors. “This is a great example of people coming together and working together on behalf of the people in times of crisis.”

The county is working with other taxing jurisdictions, and a municipal financial committee has been established to develop a plan “for how to do this right so we can provide temporary property tax relief for homeowners without causing any long-term damage,” Mr. Bellone said, “and also continue government operations in the middle of this crisis.”


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