Moody's Investors Service has downgraded the Town of Oyster Bay's debt one notch to A3 from A2, citing its deteriorating finances.
The town has a sizable and wealthy tax base, and a manageable debt burden, but it has tapped reserves for years due to imbalanced budgets and overestimating revenues, Moody's said in a report Thursday.
"Over the past six years, the town's operating funds have experienced significant declines as a result of aggressive revenue budgeting, increasing pension and health care costs, and budgets that were structurally imbalanced," Moody's wrote.
On the positive side, Moody's said Oyster Bay's outlook was stable as it expected the town to work toward a balanced budget and cut spending. Moody's also said that pension costs, while a challenge in the near term, were expected to stabilize.
Town Supervisor John Venditto said Thursday he's directed the heads of town departments not to increase spending through the end of the year.
"I'm talking about an overall spending freeze and a hiring freeze -- not going out with new projects -- just for a few months," Venditto said.
Venditto said that such a freeze would not impact services or projects in the pipeline. The freeze would help the town better assess its finances as it prepares next year's budget, which must pass by Nov. 20, he said.
"I really wanted this budget cycle to be the budget cycle that turns the corner," Venditto said.
The downgrade came about six weeks after Standard & Poor's lowered Oyster Bay's rating to BBB from A-minus. Lower credit ratings generally increase the cost of borrowing.
Earlier this month, the town board held a hearing on piercing the state tax levy cap. Last year, the town busted the cap, raising the levy 8.8 percent when the cap was set at 1.66 percent.
Venditto said the town has made important investments in infrastructure while dealing with the financial downturn.
"I continue to be very optimistic about where the town of Oyster Bay is going and when we get there we're going to be in very good shape," hesaid. "Next year at this time we will be having a very different conversation."