Two Wall Street bond rating agencies have upgraded their outlook for some Suffolk County debt, citing an influx of more than $570 million in federal pandemic aid that helped stabilize county finances.
S&P Global and Fitch Ratings affirmed BBB+ ratings on Suffolk’s $98.9 million in public improvement general obligation bonds, which finance capital projects.
S&P boosted its outlook to positive, while Fitch revised its outlook to stable, according to reports issued July 26.
Outlooks generally indicate the direction in which bond ratings are likely to move.
Factors such as increased federal aid, improved cash flow, a low debt burden, relatively high coronavirus vaccination rates and county budgetary actions may help reduce pandemic-related economic disruptions in Suffolk in the near future, the agencies said.
Fitch also upgraded Suffolk’s rating on $80 million in short-term borrowing to the top rating of F1, from F2.
"This positive development is a direct result of our fiscally responsible approach to budgeting even during this unprecedented pandemic," Suffolk County Executive Steve Bellone said in a statement.
The county is slated to receive $571.9 million in federal aid between 2020 and 2022 through the CARES Act and the American Rescue Plan federal coronavirus stimulus and relief programs.
The county reduced spending and tapped nearly $60 million from a sewer assessment stabilization reserve fund, Fitch said.
Through a voter referendum, Suffolk also eliminated the obligation to repay more than $154 million to the reserve fund, according to Fitch.
Those actions give "the county the ability to rebalance its financial operations to improve the county’s overall financial resilience," the Fitch report said.
The agency noted Suffolk's thin reserves, growing labor costs and reliance on one-shot revenues and sales taxes in the past.
The new outlooks could improve the interest rates the county will have to pay when it next goes to borrow, said Suffolk Comptroller John M. Kennedy Jr., a Republican.
The revised forecasts also show "that the county is in a much stronger position than we were in for quite a few years there," said legislative Presiding Officer Robert Calarco (D-Patchogue).
Cash flow has improved to the extent that Suffolk won't need to issue short-term revenue anticipation notes to pay the bills in 2021, according to Fitch and S&P Global.
On Friday, Bellone, a Democrat, submitted a $307-million 2022-2024 capital budget that will fund $21 million in projects using cash instead of borrowing.
The proposed capital budget, if approved by the county legislature, would use nearly $100 million in federal and state aid for sewer, water quality, economic development and public safety projects, Bellone's office said.