Moody's reaffirms Hempstead Town's top rating
Moody's Investors Service has reaffirmed Hempstead's top-level bond rating, but revised the town's outlook from "stable" to "negative."
Hempstead, the largest town in the United States, benefits from a "large diversified tax base with close proximity to New York City," the Manhattan-based service said in a report issued Wednesday. The town's "conservative budgeting practices" also helped it maintain its AAA-level rating, the service said.
But the town has also leaned heavily on its reserves to balance the budget, including a planned $31.2 million in reserves this year, Moody's reported. Meanwhile, the town's general fund has been in decline since 2007, the service said.
"The driving factor behind the continued declines is continued use of reserves in lieu of revenue enhancements or expenditure cuts," Moody's report stated.
The negative outlook determination means the town's bond rating is at risk for a downgrade in the next 12 to 24 months, Moody's spokesman David Jacobson said. But Kate Murray, the town supervisor, released a statement that de-emphasized the negative outlook and focused on Moody's decision to reaffirm the top-level bond rating.
"Top level ratings are impressive in light of the fact that all governments in our region are dealing with increasing non-discretionary costs, such as state-mandated pension contributions and Hurricane Sandy recovery expenses," Murray's statement said. "Despite this fact, our municipality has earned the highest credit ratings available."
The Moody's report said Hempstead could shed the negative outlook with a "full replenishment of fund balance appropriation in fiscal 2014." The town's rating could suffer if it fails to "implement a structurally balanced budget," town officials said.
"There's some downward pressure on that rating," Jacobson said.