Standard & Poor’s downgraded Oyster Bay Town’s credit rating to junk status Wednesday, citing a decade of deficits and weak financial management.
The rating agency assigned the town a BB+ mark, with a negative outlook.
The downgrade will hit Oyster Bay residents’ pocketbooks as the cost of borrowing for things like roads and other infrastructure goes up.Story2 town contracts went $287G over budget EditorialEditorial: Town planning chief should step down
The report placed blame for the town’s financial deterioration on its government. Standard & Poor’s criticized the town’s “lack of forward looking financial management policies . . . a history of optimistic revenue and expenditures assumptions without sufficient validation.”
The town has no long-term financial or operational planning, no debt management policies and none to maintain reserves to deal with cash flow and volatility, the report said. The rating agency also said the town has demonstrated an “inability” to make necessary budget adjustments during the year despite creating monthly spending reports.
The downgrade “reflects Oyster Bay’s chronically weak budgetary performance and very weak budgetary flexibility,” said Standard & Poor’s analyst Victor Medeiros in a news release.
Town Supervisor John Venditto, a Republican who has run the town since 1998, said the town had tried to address its financial problems in recent years but “it wasn’t enough.”
“The problem rests squarely with me and therefore, the solution rests squarely with me as well,” Venditto said.
To that end, Venditto delegated the task of finding solutions to Councilman Joe Pinto who was directed to form a task force to spend 90 days looking at the issues.
“The town needs to make some significant changes to how we deal with our financial practices on a daily basis,” Pinto said.
Matt Fabian, a partner at Massachusetts-based Municipal Market Analytics, said the loss of the town’s investment grade rating could increase the interest rates the town pays to borrow money by 50 percent.
“This is one of the most negative things that can happen to a town and a town’s bond rating,” Fabian said.
Fabian said that the downgrade tells investors that the town has been unwilling to address its financial problems.
“There are ways for management to respond to nearly any problem that don’t produce the kind of downgrading that Oyster Bay has had,” Fabian said.
Five years ago, Oyster Bay had the highest possible rating from Standard & Poor’s and a good one from Moody’s Investors Service. But those slid and Moody’s withdrew its rating altogether in January after the town failed to produce its 2014 audited financial statement.
The town did file one earlier this month, but it showed bigger operating deficits in 2014 than had been estimated, including $19 million in the general fund and $9.2 million across other major government funds.
Standard & Poor’s noted that the town’s debt burden has increased “significantly” during the past 10 years.
Town documents show that it ended 2006 with $333.6 million in long and short term capital debt, including $24.7 million in water district debt. The rating agency calculates the town’s current debt at $792 million.
Nassau County Comptroller George Maragos said the town needs outside, professional help to address its fiscal problems.
“Their financials look terrible with very few options to fix them,” Maragos said. “They’ve spent excessively, they need to clamp down.”
Nassau County Democratic Committee chairman Jay Jacobs said the downgrade “follows a long line of continuous bad news related to the management of the town of Oyster Bay, whether it’s waste, fraud, corruption or abuse.”
Venditto dismissed Jacobs’ criticism, asserting, “This is a serious governmental matter and it’s not a political issue.”