Nassau debt outlook upgraded to 'stable' by ratings agency

A Wall Street rating service Friday revised its outlook on Nassau County's long-term debt from "negative" to "stable," citing progress in reducing the budget deficit.

But Fitch Ratings, which downgraded Nassau's credit rating in June 2013 from "A+" to "A," also noted that the county has limited financial flexibility, weak financial reserves and is dependent on "economically sensitive" sales tax revenues.

Fitch maintained its "A" rating on Nassau's $1.6 billion in long-term debt, noting the county's improved relationship with the Nassau Interim Finance Authority, a state monitoring board that controls the county's finances, and its reduced reliance on cash flow borrowing.

"The 'A' rating and stable outlook incorporate Fitch's expectation that the county will continue to make modest progress in sustainable deficit reduction to maintain a stable, albeit tightly balanced financial profile," Fitch said in the report.

County Executive Edward Mangano said the "improved outlook reflects the progress government leaders have made in coming together in a bipartisan manner to address decades of poor fiscal policies."

Fitch said Nassau is facing serious financial challenges on multiple fronts. It said that in 2014, the county is projecting a $48.5 million decrease in sales tax revenues compared with projections. Nassau also is projecting $19.6 million less in state and federal aid reimbursements and $18.6 million in higher salaries due to contractual increases compared with 2013.

Partially offsetting the reduced revenues and cost increases are $20.3 million in debt service savings; $12.9 million in lower-than-anticipated fringe benefit expenses and $14.2 million in new school speed-camera revenue, Fitch said.

The agency also cited a bill passed this year by the State Legislature that aims to overhaul Nassau's tax grievance system. County officials say the measure would require commercial property owners who grieve their taxes to pay into an escrow fund pending the outcome of their appeals, saving Nassau $80 million per year,

Some business owners expressed concern that the plan will drive up taxes, while school district officials questioned the impact it would have on school budgets. Mangano has said the districts would receive 100 percent of the taxes they are requesting from commercial property owners.

In May, Standards & Poor's Rating Services affirmed its "A+" long-term rating on the county's debt while Moody's Investors Service maintained its "A2" rating on the county's general obligation debt.

The agency also cited a bill signed Friday by Gov. Andrew M. Cuomo that aims to overhaul Nassau’s tax grievance system. County officials say the measure would require commercial property owners who grieve their taxes to pay into an escrow fund pending the outcome of their appeals, saving Nassau $80 million per year.

Some business owners expressed concern that the plan will drive up taxes, while school district officials questioned the impact it would have on school budgets. Mangano has said the districts would receive 100 percent of the taxes they are requesting from commercial property owners.

In May, Standards & Poor’s Rating Services affirmed its “A+” long-term rating on the county’s debt while Moody’s Investors Service maintained its “A2” rating on the county’s general obligation debt.

By Robert Brodsky

robert.brodsky@newsday.com@BrodskyRobert

Robert Brodsky is a breaking news reporter who has worked at Newsday since 2011. He is a Queens College and American University alum.