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Suffolk County avoided another credit rating downgrade from a major Wall Street agency Thursday, but was warned that failure of its biggest-ticket deficit reduction measures – such as the sale of the John J. Foley nursing home – could again trigger action.
Fitch Ratings affirmed the county’s A+ rating for general obligation bonds, which it lowered from AA- in May, and kept its rating outlook negative. The agency was one of three to downgrade Suffolk last spring after County Executive Steve Bellone announced a three-year deficit projection of $530 million.
Since then, Bellone has announced various deficit-cutting plans that could save hundreds of millions of dollars off the estimated shortfall heading into next year. Fitch, in its report, specifically highlighted the pending $23 million sale of the Foley nursing home, and a tentative police union contract that resulted in countywide health care plan savings as showing “the willingness and ability of management to provide the framework to address the county’s significant budget deficit.”
But, it added, “the county’s inability to fully execute its budget mitigation plan or impose other needed budget-balancing measures as needed could trigger further rating action.”
Deputy County Executive Jon Schneider said he saw the report as a validation of the latest phase of the administration’s deficit-reduction plan, which is centered on the Foley sale, a $20 million deal to sell vacant land in Yaphank and the pending 8-year PBA contract.
“What it demonstrates is that the markets are closely watching what Suffolk County does in the next few weeks,” he said. “I think it’s as clear as day: if we don’t execute the rest of our plan, we will have a self-inflicted rating downgrade.”
The Foley and Yaphank sales both have drawn serious community opposition, but appear headed toward a final vote at the Sept. 13 legislature meeting. Details of the controversial PBA deal, however, are still being worked out, and that couldn’t get on the meeting’s agenda without bypassing committees.
Critics of the deal have pointed to the steady future pay increases that current police officers would get, but Bellone has touted the freezing of new officer starting pay and the fact that the pact triggered all unions to agree to find $17 million in annual health care savings, and have future employees pay into their premiums.
Bellone is counting on all three items – the Foley and Yaphank sales and the PBA deal – as major portions of his 2013 budget, which must be presented on Sept. 21.