Valley Stream’s bond rating was reduced to junk bond status after an analysis by Wall Street credit rating agency Moody’s Investors Service found the village with a mounting deficit.
Mayor Ed Fare said the village has imposed a hiring freeze and does not plan to bond for the next two years after village officials exhausted more than $11 million in reserve funds on road repairs, snow plows, ambulances and firetrucks in the past decade.
Moody’s reduced the village’s bond rating Feb. 15 from Baa3 to Ba1, which is considered “below investment grade” to determine interest rates for municipal bonds. The preliminary audit analyzed by Moody’s found the village with an approximate $672,000 deficit in its general fund in 2018.
“The village will have great difficulty in shoring up its financial position,” Moody’s analysts wrote in its report. “The village’s fund balance turned negative in 2016 and continues to worsen with no sign of an immediate turnaround.”
The report notes that the village still has adequate cash for general budget operations. The village has not issued bonds to cover budgeted expenses and operations, Fare said.
The village had $11 million in reserves when Fare took office eight years ago, but expenses have increased, including replacing a $5 million culvert that collapsed on Valley Stream Boulevard, Fare said. Spending on emergency services and infrastructure left a $2 million hole in reserves, he said.
“The prior administration probably saved too much and I probably went crazy trying to catch up,” Fare said. “The good news is we’ve turned a corner. The big-ticket items are done, and we’re putting money back into our reserves.”
The village expects future surpluses with plans to add $500,000 to reserves for the next two years to rebuild its credit rating before it needs to bond again for emergency equipment.
“We realize we decided to spend reserves to make improvements,” Fare said. “We probably should have bonded for improvements, but it’s a balancing act and the previous administration saved every penny and I was overzealous.”