Moody’s Investors Service has put the Town of Oyster Bay and seven other New York municipal debtors on review for possible downgrade or the withdrawal of their credit ratings.
The ratings agency said the reviews were prompted by “the lack of sufficient, current financial information.”
Oyster Bay has 30 days to provide information or face ratings action, Moody’s said in a statement Wednesday.
“We have yet to receive their fiscal 2014 audit,” Moody’s spokesman David Jacobson said in an email. “We look for audited financial information within a year of the end of the fiscal year or verifiable unaudited information.”
Town officials did not respond to questions about the review or the audited financial statements. Last month, the town disclosed in its latest borrowing prospectus that the audited financial statements are expected to be available in January.
Oyster Bay’s credit rating has deteriorated in recent years, with agencies citing years of unbalanced budgets and weak financial management. Last year, Moody’s downgraded the town’s credit to A3 from A2. Standard & Poor’s also downgraded the town’s debt last year to BBB from A-minus, two notches above junk bond status.
In September, Moody’s reported that it was monitoring the impact of a federal investigation into loan guarantees made by Oyster Bay in light of the indictment on bribery charges that month of town concessionaire Harendra Singh. Singh was rearrested Dec. 16 and remanded to prison for violating the terms of his release while he awaits trial.
The town’s failure to publicly disclose its potential obligation to repay loans if Singh defaults on them could have a material impact on its credit, Moody’s said in its September report.
At Singh’s court appearance on Dec. 17, a federal prosecutor said he is more than $134,000 in arrears in his obligations to Oyster Bay.
If Singh defaults on loans for capital expenses at town facilities he operates, the town could be on the hook to pay as much as $20 million under the disputed loan guarantees. Oyster Bay officials dispute that guarantees are valid, which means a default could trigger a legal fight between the town and Singh’s creditors. The New York State constitution prohibits municipalities from lending their credit to private companies.
Last month, Oyster Bay revealed in borrowing documents that it had received inquiries from the Securities and Exchange Commission and the Nassau County district attorney’s office regarding the loan guarantees and their disclosure. The guarantees were not disclosed in prior years’ audited financial statements.
In addition to the disputed guarantees, the town entered into an indirect guarantee that may be legal, but which would obligate the town to pay $2 million if the Singh concession agreement were terminated for any reason at the golf course before April 30, 2025. The town’s outside legal counsel has said a litigation strategy exists in which the town could get out of that obligation, but has not elaborated.
Lower credit ratings increase the cost of borrowing. Oyster Bay this month approved borrowing $22.7 million to settle two lawsuits brought by utility companies over sanitation district taxes. In February, Oyster Bay plans to borrow $127 million, which includes $50 million in new borrowing and $77 million of renewals of outstanding short-term debt, according to its most recent borrowing prospectus.
The town plans $30 million in cash flow borrowing in May and to renew $75 million of outstanding bond anticipation notes in July. Last month, the town reported it owed $823.7 million in bonds and bond anticipation notes as well as $30 million in short-term cash flow borrowing.
Moody’s on Wednesday also put the Manhasset-Lakeville Fire District’s credit rating on review. The other municipal debtors are in upstate New York.