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Moody's Investors Service drops rating on $1.66 billion in Suffolk County debt

The Wall Street rating agency cited the county's "recurring operating deficits" and reliance on cash-flow borrowing.

Suffolk County seal outside the H. Lee Dennison

Suffolk County seal outside the H. Lee Dennison building in Hauppauge on March 6, 2012. Photo Credit: Newsday/Karen Wiles Stabile

Moody’s Investors Service downgraded $1.66 billion in Suffolk debt Thursday, citing the county's "deteriorated financial position" due to recurring operating deficits and cash flow borrowing.

Moody's dropped the rating by a notch, from A3 to Baa1, on $1.6 billion in general obligation bonds and from Baa1 to Baa2 on another $59 million in bonds borrowed against the H. Lee Dennison Building in Hauppauge.

The downgrade "reflects the county's deteriorated financial position resulting from recurring operating deficits, deferment of pension contributions, and reliance on significant annual cash flow borrowing," Moody's said.

Suffolk County Executive Steve Bellone's spokesman Jason Elan said, "While this is based on past borrowing, we continue to implement structural reforms that will create greater efficiencies and long-term savings in county government.”

Bellone has touted cost-saving measures including a shrunken county workforce, closure of the county-run nursing home and the requirement that employees hired after 2012 pay a portion of health care costs.

Suffolk also has increased county fees for services such as recording mortgages and installing security systems. The county also has hiked annual property taxes for police services from $471 million to $569 million since 2012.

Despite those measures, Suffolk has a projected $150 million structural budget deficit — the difference between recurring revenue and expenditures — according to a report by the legislature’s nonpartisan Budget Review Office.

Legislative Presiding Office DuWayne Gregory (D-Copiague) called Moody's downgrade "concerning" and said it would probably increase borrowing costs for the county.

"We’ll certainly take their write-up seriously and have to look at it," he said. "It’s another sign we still have some struggles and challenges to face and a lot of hard work ahead of us."

Legis. Tom Cilmi (R-Bay Shore), minority leader, said the county spends and borrows too much money.

"I'm not surprised at the downgrade," Cilmi said. "The Bellone administration continues to mismanage the government. They continue to spend money we don't have."

However, Moody's adjusted Suffolk County's rating outlook from negative to stable. 

It said the county had "reduced reliance on one time/nonrecurring revenues" and increased recurring revenue.

In issuing the stable outlook, Moody's said it expects the county "will continue to make strides in reducing budget one shots and nonrecurring revenues to achieve structural balance."

It said the county's credit rating could be upgraded if it fully pays for its pensions, stops relying on "one shot" revenue and reduces borrowing for cash flow.

Bellone is required to release his budget for 2019 to the Suffolk County Legislature by Friday.

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