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Interest rate on Suffolk short-term notes relatively low
Suffolk County got a bit of good news this week when it sold $85 million in short-term revenue notes to continue making payroll.
The net interest rate it received — 1.0576 percent — was significantly lower than officials expected. Rockland County, the only other county in the state to recently resort to revenue-anticipation borrowing, received a 1.75 percent rate.
“It definitely worked out to our benefit,” said Suffolk Comptroller Joseph Sawicki.
The money must be paid back by next March, with interest of $816,566. Had the rate been 1.75 percent, net interest costs (off the notes’ adjusted total of $77.2 million) would have neared $1.4 million.
Sawicki said the way the county approached the process worked in its favor. Rather than wade into an uncertain financial market, with bidders who would certainly take into account negative reports about Suffolk’s fiscal health, officials used a municipal bond broker in a “negotiated sale.”
“They can go out and push the notes and explain to investors what’s really going in Suffolk County,” Sawicki said of the broker, “as opposed to banks coming to the table and making bids based on what they read in Newsday.”
Earlier this month, Sawicki completed an audit of the 2011 budget that found Suffolk ended the year $60 million in the red, nearly double the deficit figure predicted by an independent panel. That panel projected, with no action, a total deficit of $530 million through 2013.
Suffolk hadn’t used revenue-anticipation notes to pay its bills since the early 1990s. Like other municipalities, it more frequently borrows against tax revenues. Last December, when the county sold $400 million in tax anticipation notes, it received a 1.24 percent interest rate.
The legislature approved up to $90 million in revenue-anticipation notes, to be paid back by March 2013. Officials initially estimated only needing $70 million, but with more than 70 police officers taking an early retirement incentive this month to save the jobs of others, the need for immediate cash — to meet the deal's agreed payouts — increased.