Moody’s Investors Service upgraded Oyster Bay’s credit rating to Baa2 from Baa3 on Wednesday, citing recent “cost cutting” and “substantial tax increases.”
Moody’s wrote in its credit report that the town is “on the road to healthier finances and there now is every indication that the town’s efforts will culminate in a successful restoration of health.”
The rating is Moody’s second-lowest investment grade rating.
Moody’s said the town’s weaning off of cash flow borrowing was a sign of improved fiscal health.
In a news release Thursday, Town Supervisor Joseph Saladino said, “We will continue to keep our promise to taxpayers by protecting their wallets while sustaining services.”
The cumulative effect of the 11.5% property tax hike approved in 2016 was one of the factors leading to the upgrade, Moody’s analyst Douglas Goldmacher said in an interview.
“It takes a little bit of time for that to start to have a big impact, but once it gets going it was a lot of extra money,” Goldmacher said. The additional money “went a long way toward taking their previously very negative reserve position to [the town] being in a much healthier place.”
Oyster Bay's operating revenue increased from $296 million in 2016 to $319.5 million in 2017, and to $328.9 million in 2018, according to the Moody’s report.
The settlement reached last year of the securities fraud lawsuit brought by the Securities and Exchange Commission in 2017 without fines or bans and the imposition of a court-ordered consultant to strengthen oversight was positive for the town, the report said. Moody’s said in 2017 that potential penalties and restrictions proposed by the SEC could have hurt Oyster Bay’s credit.
The town’s finances have been improving since hitting bottom in 2015 when Moody’s calculated its fund balance deficit at $73.6 million.
The town’s rating still hasn’t returned to what it was before Moody’s withdrew its rating in 2016 due to lack of financial information. The rating had been A3 and was reinstated three notches lower at Baa3 in 2017.
“They still have weak finances … and they still have a long way to go, but they have been doing a good job of repairing the problem and moving in the correct direction,” Goldmacher said.