Moody’s Investors Services has downgraded the Bay Shore Union Free School District’s 2013 general obligation bonds from Aa2 to Aa3, the rating agency announced Friday, at the same time removing a negative rating outlook.
In a news release, Moody’s said the downgrade, and assignment of a Aa3 rating to the district’s $37.15 million School District Refunding Serial Bonds, reflects a “weakened financial position following a six-year period of declining reserves.”
The rating takes into consideration a “moderately-sized tax base that has sustained significant reductions during the downturn, strong wealth levels and other socio-economic indicators, and a slightly above-average debt burden,” the release read.
Of removing the district’s negative outlook, Moody’s said that Bay Shore has taken serious steps in its latest budget to “stabilize its financial position and begin rebuilding reserves.”
Bay Shore’s 2013-14 budget busted the state-imposed 2 percent tax levy cap, raising taxes on the average home by 5.9 percent, which district officials said was needed to make up a loss of $20.8 million in state aid in the past five years.
The $143.7 million budget represented a 1.2 percent decrease from the 2012-13 spending plan. Bay Shore was the only district on Long Island to pass its tax cap-busting 2013-14 budget on the first try.
Moody’s cited Bay Shore’s “lower reserve levels than peers following a period of fund balance drawdowns” and “significant declines” to the district’s tax base as challenges in the future.
The Moody’s Aa3 rating means that Bay Shore’s general obligation bonds are still high quality and subject to a very low credit risk.
Bay Shore school board member Guy Leggio declined to comment, saying the board needed further information.