Oyster Bay expects to lose its bond rating from Moody’s Investors Service because it did not meet a deadline to provide audited financial information for 2014, the town disclosed in a borrowing prospectus Monday.
Loss of the bond rating would cost taxpayers because Oyster Bay would have to pay higher interest rates to borrow money.
“Based on the information provided to the town by Moody’s and the town’s inability to provide Moody’s with the required information, the town expects the Moody’s bond rating will be withdrawn,” the town said in the prospectus.DocumentsRead the documents
Last month, Moody’s warned Oyster Bay it could lose its credit rating if it did not provide audited financial statements by last Saturday.
Oyster Bay officials said the failure to meet the deadline was caused by problems that arose when the town switched from a mainframe computer system to Microsoft Dynamics AX in January 2014.
For a large, wealthy town to lose a bond rating “is very uncommon” said Matt Fabian, partner at Municipal Market Analytics, a Massachusetts-based research firm.
“You could see investors pull away and not want to buy Oyster Bay anymore,” Fabian said. Other investors, however, would still find the town’s debt attractive, he said.
Oyster Bay finance director Robert Darienzo said in a statement that “the town does not anticipate any adverse effects regarding future borrowing as a result of this withdrawal.”
Darienzo said the cause of the withdrawal was the result of “unforeseen delays in reporting due to the town’s modernization of its accounting software” rather than its financial position.
David Jacobson, a Moody’s spokesman, said last week that the agency could take a rating action on Monday or Tuesday, but at the end of the business day Monday, it had not taken any action.
The town said in the borrowing prospectus that it expects the audited financial information to be available by March 31. The town said it plans to borrow $122.6 million in short-term bond anticipation notes on Wednesday.
Oyster Bay’s credit rating has deteriorated in recent years, with agencies citing years of unbalanced budgets and weak financial management. In 2014, Moody’s downgraded the town’s credit to A3 from A2. Standard & Poor’s also downgraded the town’s debt in 2014 to BBB from A-minus, two notches above junk bond status.
Town Supervisor John Venditto has blamed the downgrades on the economy.
In September, Moody’s reported that it was monitoring the impact of a federal investigation into $20 million 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. His next court date is Feb. 11. Town officials assert that the loan guarantees are invalid but noted in the prospectus that the town can borrow money to pay the liability if necessary.