Babylon Town debt gets stable outlook from S&P, Moody's

Babylon Town Supervisor Rich Schaffer on July 30,

Babylon Town Supervisor Rich Schaffer on July 30, 2012. (Credit: James Escher )

Two ratings agencies have affirmed their stable outlook for Babylon Town's debt.

The reports issued this month from Standard & Poor's and Moody's covered $34.5 million of new public improvement bonds and $24.6 million in bond anticipation notes, as well as $113 million of the town's outstanding bonds.

The borrowing will fund reconstruction from superstorm Sandy; acquisition of properties for the housing and retail development known as Wyandanch Rising; and finance existing debt. The federal government is expected to reimburse the town for a portion of the Sandy spending.

Standard & Poor's assigned an AA+ rating to the bonds, its second-highest; Moody's assigned an Aa2 rating to the bonds, its third-highest. Both agencies gave top ratings to the notes. Higher ratings can translate to lower borrowing costs.

Town Supervisor Rich Schaffer said in a release that the ratings reflected "sound fiscal management that has resulted in Babylon having one of the highest bond ratings on Long Island."

Standard & Poor's based its ratings on the town's history of good market access, strong finances and good financial management but cautioned that purchase and sale of land for Wyandanch Rising exposed the town's general fund to added risk.

Moody's report cited the town's "historically strong Operating Funds despite recent declines, a mature and sizable tax base, and manageable debt position" in its rating of the new bond issues.

Babylon's large and diverse tax base and cash-rich commercial and residential garbage funds are strengths, the report said, but weakened mortgage tax revenue in recent years have put pressure on the town's general fund.

The town's handling of pension payments could affect its future debt ratings, the report said, with "continued use of the pension amortization program resulting in outsized long-term liabilities."

Pension amortization is sometimes used by public employers who want to "smooth" or regularize their annual pension contributions.

The town stopped the practice this year, spokesman Kevin Bonner said, and will pay $3.5 million toward pension obligations.

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