Agencies maintain Nassau credit ratings but cite concerns

Wall Street agencies have maintained their credit ratings on Nassau's $1.6 billion in long-term debt but warned that new contracts with county labor unions could strain the county's finances and rely on unproven revenue sources.

Moody's Investors Service Thursday maintained its A2 rating on Nassau's general obligation debt, while Fitch Ratings affirmed its A rating of Nassau's long-term debt and continued its negative outlook.

On May 27, Standards & Poor's Rating Services affirmed its A+ long-term rating on the county's debt and left unchanged its SP-1+ short-term credit rating.

County spokesman Brian Nevin said County Executive Edward Mangano's administration was "pleased that all three rating agencies have maintained the county's credit rating during these challenging economic times."

But all three rating services raised concerns about how Nassau will pay for the new labor deals, which the county's financial control board says will cost at least $130 million.

Moody's said the county has a stable fiscal outlook due to its wealthy tax base, manageable debt and oversight by the Nassau Interim Finance Authority, a state monitoring board that controls the county's finances.

But Moody's, which has downgraded Nassau's credit rating twice since 2010, said the combination of "highly volatile sales taxes" and the new labor deals will "exacerbate" pressure on the county budget.

Nassau's contract with four county labor unions will provide raises totaling 13.4 percent over four years.

Mangano said the county will fund the raises in part through increased sales tax, revenue from 56 speed cameras that will operate outside county schools and $15 million in new county fees. The county faces a projected deficit of $122 million in 2014, NIFA said last year.

NIFA has given Mangano until June 30 to amend his four-year budget plan and show how he will pay for the labor contracts.

Fitch said the labor contracts would provide "long-term savings and bring cost certainty to the budget."

But the county's "favorable position is tempered" by higher salary expenses that will be funded with "unproven revenue sources," Fitch said.

Fitch lowered Nassau's credit rating in June 2013 from A+ to A. Downgrades typically result in increased borrowing costs.

S & P maintained the county's stable outlook, citing the county's progress in "restoring structural balance." But S & P said Tuesday that Nassau's financial flexibility remains "weak" because of rising health care and pension costs, "economically sensitive" sales tax revenue and continued borrowing to pay for property tax refunds.

S&P said that if Nassau does not make structural adjustments to its finances, it could drop the county's credit rating during the next two years.