Moody's Investor Service downgraded Suffolk's bond rating Tuesday because of its continuing reliance on one-shot revenue, borrowing to meet cash flow needs and stretching out pension payments.
Moody's downgraded the rating on its $1.4 billion general obligation debt to A3 from A2 and also downgraded $70 million in revenue bonds issued by the county's Judicial Facilities Agency, in connection with a sale-leaseback of the H. Lee Dennison Building in Hauppauge.
The change comes as the county plans to sell bonds at month's end to refinance $70 million in county debt bonds, which is expected to save the county about $3.5 million or 5 percent. Standard & Poor's maintained its rating while Fitch Ratings left its rating unchanged but moved Suffolk from a negative outlook to stable.
Vanessa Baird Streeter, a spokeswoman for County Executive Steve Bellone, said the Moody's assessment is unfair because the ratings agency this year revised its "rating method to more heavily weight the historical past" dating back to 2005, long before the current administration took office.
"There was no event that triggered this down-rating," she said. "We can't do anything about the past, we can only address things going forward," noting the county has reduced payroll, increased revenue and cut reliance on one-shots.
In issuing the rating, Moody's analysts warned that the county still has a "large GAAP basis General Fund deficit," and has an "extremely tight liquidity position" that relies on short-term cash flow borrowings and a budget balanced by "one-time revenue and expenditure items."
But Moody's analyst added: "Our expectation is that the county will continue to reduce its reliance on one-time revenues to balance the budget and return to structural balance and add to reserve levels going forward."
Moody's officials said downgrading bonds for the Dennison building reflects the risk that the county legislature could decide to not appropriate funds to repay the debt, and the fact that the building is appraised at only $24 million, far below the $70 million in bonds issued. Under the sale-leaseback deal, the judicial agency bought the building for $70 million in upfront cash and the county will pay back the bonds issued by the agency over the long term. Martin Cantor, head of the Judicial Facilities Agency, could not be reached for comment Tuesday night.
Standard & Poor's maintained its rating but said "our view is that its strained finances will persist for the next one to two years." However, S&P noted that officials are projecting a surplus of $10 million coming out of 2013, compared to a $175 million deficit a year ago.
Fitch, in changing Suffolk's outlook said they "viewed positively the county's progress to date in improving financial operations" including the expected surplus.
They also cited Suffolk's below average unemployment and high wealth levels as positive factors.