Bond rating lowered for Oyster Bay Town

A major credit service Tuesday lowered its bond rating for the Town of Oyster Bay, saying it has relied excessively on cash reserves to fund operations and had not developed a plan to rebuild the fiscal cushion.

Standard & Poor's Ratings Services lowered the town's long-term rating from AAA, the top rating, to AA on the town's general obligation bonds, saying the outlook is negative.

But it retained its SP-1+ rating for the town's series 2011B bond anticipation notes used to fund capital projects, the highest rating.

Town Supervisor John Venditto said the town would fix the problems cited, without raising taxes, cutting services or laying off employees.

The lowering of the bond rating means it could cost the town more to borrow money.

"The downgrade is based on a significant deterioration in the town's financial position and the lack of a plan to improve financial operations," Standard & Poor's credit analyst Kate Hackett said.

At the end of fiscal year 2005, the town had $20.3 million in reserve. By the end of last year, the reserves had dwindled to $375,000.

In the town's favor, she added, is a strong local economy with easy access to New York City; residents' high income levels; a large and diverse property tax base; and a moderate overall debt burden.

"We've used up the savings to keep everything moving," Venditto said. He blamed the problem on the economic downturn and the resulting decrease in mortgage tax and sales tax revenue. He said that he has expected since 2009 that town finances would take a downturn either this year or next year with the poor economy.

"We need a plan to offset this loss of revenue," he said.