A Wall Street rating agency has upgraded Nassau’s bond rating outlook, despite the county’s strained finances.
Standard & Poor’s revised Nassau’s bond rating outlook Wednesday from negative to stable and upheld its “A+” long-term rating, citing the county’s improved financial position.
Fitch Rating on Thursday also affirmed Nassau’s A rating and its stable outlook.
Timothy Little, an S & P Global Ratings credit analyst, wrote that during the past two years the county has improved its “budgetary flexibility” and cash management practices and no longer expects to borrow to pay property tax appeals.
“The stable outlook reflects our opinion of Nassau County’s deep and diverse economy and progress to date on its plans for restoring structural balance and improving budgetary flexibility,” Little said. “We do not expect to change our rating during the two-year outlook period.”
S & P noted in its report that Nassau had reduced its projected cash-flow borrowing by $77 million for 2017, down to $300 million.
The agency also cited preliminary estimates by County Comptroller George Maragos that Nassau ended last year with a $39.6 million budget surplus. The surplus funds are expected to go toward paying tax refunds.
Maragos’ surplus calculation uses “one-shot” measures such as reserve fund transfers and borrowed money to pay tax refunds and other expenses.
The Nassau Interim Finance Authority, the county’s financial control board, says the county cannot use borrowing proceeds or other one-time revenue sources to restore programs or provide tax relief, as such funding isn’t sustainable.
“The steps taken by my administration to fix Nassau’s finances while not raising property taxes 6 out of 7 years, tripling Nassau’s reserves and eliminating borrowing for tax certiorari has stabilized the county’s finances,” said County Executive Edward Mangano.
But Little warned that Nassau “continues to face substantial budgetary pressure” because of its reliance on sales tax revenue, which is sensitive to the condition of the economy; rising employee costs; and deferred pension expenses that now total $232.6 million.
S & P also described Nassau’s budgetary performance and flexibility as “very weak” because of deficits in the county’s operating funds and a lack of significant growth in its reserves.
Fitch said in its report that it expects Nassau to “continue to generate roughly break-even results” and that the pace of its spending, while “modest,” is still likely to exceed revenue.
“Despite minimal reserves, the county has demonstrated adequate financial resilience, with modest annual operating surpluses or deficits throughout economic cycles,” Fitch said.
Although Mangano pleaded not guilty last year to federal corruption charges, S & P said the issue was not expected to have a “material effect on the county’s financial position” because of the oversight of the NIFA board.