Moody's downgrades Oyster Bay credit rating
Debt-strapped Oyster Bay has suffered another credit rating downgrade, this time at the hands of Moody's Investors Service, which Monday said it was dropping the town two notches from Aa3 to A2.
Standard & Poor's, the agency that Oyster Bay uses to have its debt rated, last April also bumped the town down its rating scale from AA to A.
Town Comptroller Robert McEvoy Monday said Moody's decision is a reflection of the S&P downgrade. He added that Moody's is "doing their due diligence" and updating records in light of a U.S. Department of Justice lawsuit that alleges manipulated bond ratings by S&P.
"We were kind of expecting this," he said. "They haven't rated us in well over a year."
Moody's assigned a "negative outlook" to Oyster Bay, citing the town's "deteriorating financial position due to multiple years of structural imbalance resulting in significant declines in reserve levels." The town will have trouble replenishing its fund balance given the continued use of that balance and current operations, Moody's said.
The agency, however, noted the town's large and wealthy tax base and "manageable debt burden" as factors in its favor.
The town is battling its way out of $828.7 million in overall debt, including $13 million in deficiency notes and $16.8 million in revenue-anticipation notes it borrowed last year to cover operating costs, documents show.
The town's debt can be compared with the $723.9 million it owed in November 2011. It had a top S&P rating of AAA in August 2011.
S&P's current rating for the town is roughly equivalent to Moody's, but Oyster Bay has taken several steps between April and now to alleviate its debt burden.
It cut 92 employees using buyouts and struck a deal on concessions with the labor union. The town was poised to lay off 200 workers before the union agreement, which included salary freezes this year and a no-layoff clause for 1,100 employees.
Now, the town is seeking to sell some of its properties and hopes to launch another round of incentivized retirements.
McEvoy Monday said the Moody's rating "really isn't going to have an impact on us right now, but it's good to get a fresh look."
The town's buyouts have saved it $10.5 million in salaries and benefits. That and the other initiatives should eventually earn Oyster Bay stronger bond ratings, McEvoy said.
"We're definitely moving in the right direction, and we won't see the true value of these measures until the end of 2013," he said. "We will get upgrades, because this is the lowest we ever want to be."