|
Moody's Downgrades County's Debt Rating
Rating Falls from Aa2 to Aa3
by Margaret Sternberg
Last month Moody's Investor Service assigned a rating of Aa3 to $16.2 million in Public Improvement Bonds, 2007 issued by Putnam County, at the same time downgrading the County's general obligation rating to Aa3 from Aa2, affecting $43.5 million in previously issued debt.
The rating keeps bonds issued by the County at "investment grade" level, meaning they are of high quality and considered a low credit risk.
Although Putnam County's Commissioner of Finance, William Carlin, was unable to give an exact figure as to how much the downgrade cost the County, he did acknowledge that the lower rating possibly resulted in the county paying interest at a higher rate on the bonds it issued. Commissioner Carlin maintained that there is very little difference between Aa2 and Aa3 ratings.
Although Moody's ratings are based upon a number of factors, the Moody's report on Putnam County cites a "substantial narrowing of the county's cash position following three consecutive operating losses, with a fourth…projected for 2006." The report also cited a shortfall in sales tax revenue in 2006 and projected a 3 percent decline in sales tax revenue in 2007, although that figure would represent a 5 percent increase over projected actual 2006 sales tax collections.
When County Executive Bob Bondi structured the 2007 County budget, the County proposed using $2.9 million of the surplus in 2007. The surplus, following that deduction, is now approximately $4 million, which was thought at the time to be roughly the lowest amount it could drop to without affecting the County's bond rating.
Commissioner Carlin said that "knowing that we faced a financial downgrade, I discussed this with Bob [Bondi] and our financial advisors and they said if you go down from a Aa2 to a Aa3, it's not going to affect your bond issue. It's still going to be a high quality issue, heavily in demand…Nobody wants to be downgraded, but you take the long-term benefits of issuing paper in this interest rate environment, which, right now, the interest rate is very low…They [the financial advisors] said if you can get out at 20 - 25 years at less than 4.5 percent, we recommend that you take that opportunity because it may not be here in six months. If the Fed raises interest rates again our opportunity to borrow this amount of money at this interest rate is lost." Carlin added that they had decided "whatever happens to the rating happens to the rating, but now is the time to borrow to pay off this debt because we're going to get a great interest rate."
Both Commissioner Carlin and County Executive Bondi consistently downplayed the significance of the downgrade and attributed any financial issues in the County to a lack of revenue. Mr. Bondi said "We are of the opinion that without more commercial development we will see ever-expanding taxes, both in schools - as you get more residential development - and in property taxes for counties like Putnam County, as we're seeing now." Mr. Bondi said that if there were more commercial development and people did more shopping within the County, there would be more sales tax revenue.
Legislator Vinny Tamagna saw the downgrade in a different light, saying that he viewed it as "the beginning of a downward spiral." Tamagna said the County is in a "budget crisis" and called for an "independent audit, something that would give me the confidence that I need to know that the numbers that we have are heading in the right direction, are the most responsible and are stable. I haven't had that confidence, and we are getting ourselves into trouble every single year. We will have our biggest problems yet this year."
Tamagna said he views the downgrade as a message from "someone who comes in independently, looks at our books, and has also, like me, lost confidence in our ability." Tamagna agreed with County Executive Bondi and Commissioner Carlin that this downgrade would affect the County's bond rating "in a small way," but suggested the County would be reviewed every time it goes out for bond.
Tamagna also gave credit, noting that when one looks at the amount of debt the County has, "The County Executive and legislature have been very frugal…having spent NYC Watershed money, haven't borrowed anything major [in a long time]."
However, Tamagna warned that there would be a number of capital improvements upcoming that would require going out for bond. He saw the eventual impact of the downgrade as well as rising property taxes and capital improvement projects as making an impact on the amount of money the County is able to borrow.
Tamagna said he saw part of the issue as the County having been able to balance its budget on the surplus or from "one-shot" infusions of money, such as the tobacco settlement, into the county. "We don't have any of those things anymore…and we need to balance the budget. It will affect our bond rating. We're headed for some turbulence"
Providing local news, information and opinions from
Philipstown and Putnam Valley, NY
Encompassing the Villages of Cold Spring and Nelsonville,
and the hamlet of Garrison, Putnam County, NY.
This site is a publication of The Putnam County News and Recorder, the source for news and information of the Philipstown
and Putnam Valley area. The PCN&R is 139
years old, published in hard copy every Wednesday, and circulated throughout Putnam
County, NY.
The PCN&R prints LEGAL NOTICES
for: Putnam County, The Town of Philipstown, The Town of Putnam Valley, Village of Cold Spring, Village of
Nelsonville, the Haldane Union Free School District and the Garrison Union Free School
District.
Deadline for printed press releases, advertisements and classifieds is Monday at noon for
Wednesday publication. This site is updated on an as-needed basis with a minimum update
weekly on Thursdays. For further information or to request a subscription to the paper, please
contact us with your name and mailing address at:
(845) 265-2468 PO Box 185, Cold Spring, NY 10516, or e-mail us at editor@pcnr.com
If you see an advertiser on line, tell them! | Click ads below
for larger version
System and Method for Display
Ads have a Patent Pending.
Click Here for More Information
|
