Fitch gives Suffolk ratings a negative outlook

A second Wall Street agency has given Suffolk County's credit rating a negative outlook, citing diminishing reserve funds and "aggressive" estimates of sales tax revenue.

Fitch Ratings maintained the county's AA- rating, but on Tuesday issued a negative outlook for county bonds. Standard & Poors, which has held the rating of county bonds at AA, issued a negative outlook during a county borrowing in May. Moody's Investor Services has maintained Suffolk's rating at Aa2. The ratings apply to Suffolk's proposed sale of a $90.6 million bond refinancing aimed at saving the county $3 million. The issue is expected to be sold Dec. 7.

A negative outlook warns investors of a possible credit downgrade if fiscal conditions continue to deteriorate.

"The county's overall financial flexibility and cushion have weakened, reflected in a significantly lower fund balance and reduction in the tax stabilization reserve fund," Fitch said Tuesday.

The agency also expressed concern that Suffolk's "aggressive" estimate of sale tax revenue "remains vulnerable to shortfalls," noting that the county has budgeted a $46.3 million increase in sales tax revenue next year.

County Executive Steve Levy, a Republican, blamed Fitch's negative outlook on the county legislature's changes to his proposed $2.7 billion budget. Lawmakers balked at Levy's plans to close or sell the county nursing home and to lay off 710 employees if unions did not make concessions.

"This is exactly what we warned against," Levy said. "The negative outlook comes after legislators ducked the tough decisions."

But Republican County Comptroller Joseph Sawicki argued that Levy, "can't blame the legislature for this, since he literally micromanaged the county himself for the last eight years."