Credit rating good news for Smithtown's increased borrowing

A credit ratings service maintained Smithtown’s Aaa rating and assigned the same top rating to $10 million in public improvement bonds the town issued this year in a boon to Smithtown Supervisor Edward Wehrheim as he pushes multimillion-dollar capital projects.

The rating from Moody’s Investors Service will help keep the town's borrowing costs at what Comptroller Donald Musgnug said was the lowest level in almost a decade. 

Smithtown is using its 2020 bond issue to fund projects such as the rebuild of Flynn Memorial Park, the installation of new water mains under Lake Avenue in St. James, and the purchase of new trucks for the town highway department. Infrastructure projects pushed town borrowing this year and last year above the normal range of between $3 million and $6 million, Musgnug said. 

Smithtown now has about $36.5 million in debt outstanding, but Musgnug said some of that will be paid off this year. 

The town will pay 1.68% interest on bonds issued this year, Musgnug said. “This is the time you want to borrow and do major infrastructure repairs,” he said. 

Moody’s announced its bond rating Feb. 24 along with a more detailed credit analysis of the town the next day that praised the town’s “wealthy tax base and strong economy, solid and stable fiscal position, and low debt with rapid repayment.”

Moody’s also noted that the town’s tax base has grown from $18.4 billion in 2017 to $21.1 billion in 2020. That growth is driven by commercial expansion, with 3.6 million square feet of commercial development in planning, construction or recently completed, company analysts wrote. 

High-profile applications, such as Gyrodyne in St. James, have made some civic associations uneasy, but town officials have said most growth over the past several years was renovation of existing or blighted spaces, not new construction.

“We remain committed to smart growth and economic development as well as continued capital improvement projects that generate a return on investment for the Smithtown taxpayers, all while adding to the town's amenities and charm,” Wehrheim said in a statement this week. 

The credit analysis included what Musgnug said appeared to be a first: a warning that “elevated water stress and hurricane risk in Suffolk County” could prove to be a credit challenge. Analysts, using data from Four Twenty Seven, a Moody's affiliate that studies the economic risk of climate change, wrote that "environmental exposure is not currently a source of significant credit weakness" and that the town's relatively steep shoreline buffers against flooding. But it has no "comprehensive climate reliance strategy," which they said "will be a more material factor in the event of a severe climate event." 

A Moody’s spokesman, David Jacobsen, said the company has “always looked” at environmental considerations, but began devoting a special section of credit analyses to the subject about a year ago. He said it was not possible to say if the warnings could make it more expensive for towns like Smithtown to borrow money, since interest rates depend on many factors. 

By Nicholas Spangler

nicholas.spangler@newsday.comspanglernewsday

Nicholas Spangler is a general assignment reporter and has worked at Newsday since 2010.