Moody’s Investors Service has downgraded Mastic Beach six levels to non-investment grade, citing financial instability, overspending by $400,000 on a road project, a declining tax base and operating at a deficit for three straight years.
The Manhattan-based agency gave a negative outlook for Mastic Beach, which was left with three full-time employees after layoffs last month.
Moody’s downgraded the village from A1 to Ba1, 11 rating levels from the top. They had been at the fifth level. At the 11th level, municipal bonds are considered non-investment junk status and borrowing would be a credit risk.
Any downgrades more than three levels is “pretty uncommon,” Moody’s spokesman David Jacobson said.
Such a downgrade significantly increases interest rates for the bond project village officials are expected to undertake next year to make up for overspending more than $400,000 on a road project.
Village Mayor Maura Spery, in a Wednesday phone interview, blamed the steep downgrade on the village board majority opting not to increase taxes when it adopted a $3.89 million budget in April. The village has also exhausted its surplus.
“Quite honestly, my budget would have kept us at a high bond rating. We wouldn’t be in this situation had we at least pierced the [state mandated] cap,” said Spery, whose proposed 125 percent tax hike was rejected.
Village treasurer Anne Abel also recommended in April that the board pierce the cap.
“I would have increased taxes. A tax-neutral budget doesn’t allow for us to come up with reserve funds,” Abel said, noting the board worked on seven budgets before the spending plan was adopted.
Board members Joseph Johnson and Anne Snyder largely crafted the 2016-17 budget. Snyder didn’t return multiple phone messages. Johnson was unavailable for comment. Trustees Betty Manzella and Christopher Anderson also didn’t return messages.
Earlier this year, Standard & Poor’s downgraded Oyster Bay Town’s credit rating to junk status, citing a decade of deficits and weak financial management.
Among Mastic Beach’s strengths, according to the June 2 report, are having no debt and pension liabilities, the ratings service said.
But Mastic Beach has very weak financial flexibility, a history of failing to balance budgets, a limited tax base with recent declines, and below average wealth levels compared to the region.
Moody’s said the village also has a high turnover of financial managers. The municipality has had six treasurers in five years.
The drop also reflects a rapidly deteriorating fund balance and liquidity resulting from three straight years of operating deficits.
Village officials are contemplating issuing deficit financing bonds, which require state approval. Without an infusion of cash the village will struggle, the service said.
Mastic Beach officials were warned about the upcoming downgrade.
In April, Abel said that Moody’s had contacted the municipality about its financial woes.
Referring to the Moody’s report in a village-wide email he distributed during Tuesday night’s board meeting, former deputy mayor Bruce Summa reminded residents that a petition to dissolve the village is circulating.
“You may also call me or message me if you are interested in signing the petition and I will make sure you are contacted by the dissolution committee,” Summa wrote.