Standard & Poor’s Global Ratings has downgraded Suffolk’s bonds by a notch, from A to A-, because the county is unlikely to generate enough in budget surpluses to build significant reserves over the next four to five years.
While the county’s fiscal problems have ”stabilized,” the Wall Street rating agency said, “performance has not improved enough to provide significant structural changes . . . to generate surpluses on an ongoing basis,” without the use of one shot revenues for the next two years.
S&P, which last dropped Suffolk’s rating less than two years ago, warned that the county’s ongoing budget gap creates a “credit weakness” that puts the county at a level “more comparable to lower rated” municipalities.
The situation “results in a weakened ability to meet financial obligations if a period of substantial economic distress were to occur,” S & P said.
County Executive Steve Bellone said the rating brought Suffolk “on par” with ratings by Fitch Ratings and Moody’s Investors Service “while acknowledging our 2017 fiscally conservative budget. The administration will continue to build on its progress in reducing the structural deficit and maintaining its favorable debt profile.”
The S&P downgrade came as Suffolk prepared for a June 29 borrowing of $48.7 million for road and construction projects as well as lawsuit settlements. Fitch Ratings is expected to issue its bond rating for Suffolk later this week.
The S&P downgrade came late Monday after legislative and county executive budget aides had forecast that Suffolk county faces a $163.1 million to $165.4 million shortfall, heading toward introduction of the 2018 budget in mid-September.
Bellone and Democratic legislative leaders on Monday put forward a “fiscal accountability plan” requiring 221 appointed aides making more than $75,000 a year to accept a one-year freeze on step pay increases based on years on the job.
The plan also requires all exempt and elected officials to pay a 15 percent share of health insurance.
Bellone said the moves would save $3.8 million. He said the county also would embargo $8.5 million in departmental spending in 2018, as he’s done for the past six years.
However, Legis. Kevin McCaffrey (R-Lindenhurst), legislative minority leader, said Bellone’s initiative “does not do anything but allow him to hold a news conference to say he’s doing something.”
McCaffrey called on Bellone to ask public employee unions and lawmakers of all parties to “share the pain” and develop ways to restructure county government.
Presiding Officer DuWayne Gregory said the S&P downgrade shows the county “still has some challenges,” and needs to “take a deep dive” in reviewing expenses.
Fitch last downgraded the county from A+ to A in March, 2013; Moody’s Investor Service dropped Suffolk’s rating three times from 2012 to 2014 from Aa2 to A3.
County Comptroller John Kennedy expressed concern that the latest drop “will increase borrowing costs and diminish the pool” of bond buyers, although he could not estimate the fiscal impact.
Legis, Louis D’Amaro (D-North Babylon), budget committee chairman, said he does not expect much fiscal impact because interest rates are so low. However, he added, “It drives home the point, we have to continue in the direction . . . of making recurring cuts and bring in recurring revenues.”