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Moody's downgrades Nassau credit rating

Nassau County Executive Edward Mangano looks over his

Nassau County Executive Edward Mangano looks over his proposed 2013 county budget in his office in Mineola. (Sept. 18, 2012) Credit: Howard Schnapp

A major Wall Street ratings firm downgraded Nassau's credit Tuesday for the second time since County Executive Edward Mangano took office nearly three years ago.

Moody's Investors Service dropped Nassau's rating by a notch to A2 from A1 on the county's total $1.4 billion in debt. The agency also revised the county's credit outlook to stable from negative, indicating another ratings drop is unlikely soon.

Credit ratings assess the perceived risk to investors in purchasing Nassau bonds. A lower credit rating generally results in higher costs to taxpayers because investors demand higher interest rates when the county borrows money.

Moody's said Nassau's downgrade reflects the "further weakening of the county's financial position" in 2011 and the expectation that the county's reserves will continue to decline.

After Democratic county lawmakers refused to provide the votes needed to borrow to pay property tax refunds from last year, the county in June transferred $43 million from this year's $92 million rainy-day fund to prevent ending 2011 in a deficit. County officials warned then that cutting this year's reserves would be viewed negatively by credit rating agencies.

Democrats have refused to approve borrowing because of an unrelated legislative redistricting dispute.

Mangano aide Brian Nevin said Mangano was not available for comment because of the fatal shooting of police officer Arthur Lopez earlier Tuesday. Nevin said the downgrade "comes as no surprise as Democrat legislators have refused to cooperate in cleaning up decades worth of debt without raising property taxes."

But Democrats blamed Mangano, a Republican. "At the end of the day, the policies and mismanagement of the Mangano administration continue to hurt taxpayers and make it more difficult for Nassau's fragile economy," said Minority Leader Kevan Abrahams (D-Freeport).

County Comptroller George Maragos also said the downgrade was not unexpected. Citing his own news releases from the past year, Maragos said, "Moody's is reflecting the comptroller's assessment of current and long-term conditions and challenges." Maragos said the Nassau Interim Finance Authority, a state board that controls the county's finances, should have eliminated interest-rate swaps on variable-rate debt NIFA had borrowed on Nassau's behalf. Swaps are a way to hedge against interest-rate risk.

Moody's said its downgrade "incorporates the county's significantly reduced liquidity, weak governance practices and significant exposure to variable rate debt and interest rate swaps."

NIFA chairman Ronald Stack declined to comment on the Moody's report.

Moody's also downgraded $13.1 million in Nassau's Off-Track Betting Corp.'s debt one notch from A3 to Baa1.

The agency had downgraded Nassau in November 2010 from Aa3 to A1.

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