Fitch Ratings downgraded the general obligation debt of Suffolk County, N.Y. to A from A-plus on Monday afternoon. Fitch retains a negative outlook on the bonds.
Suffolk County government has about $1.4 billion in GO debt and about $2.2 billion in total direct debt, Fitch director Karen Wagner said.
Fitch is concerned about the county’s ability to achieve stable financial operations and is even more pessimistic about its chance of reducing its large accumulated debt.
The anticipated results for 2012 are worse than had been budgeted. Preliminary figures for fiscal 2012 (which corresponds to the calendar year) show a combined general fund and police district budget deficit of $90.8 million. This is worse the previously projected $64 million deficit.
The 2013 budget includes a deficit even though the government is including several non-recurring revenue measures. Some of these measures may not be able to be instituted because of litigation or required state approval, Wagner wrote.
The county expects revenues received by a 2014 note repayment date will provide narrow coverage. This coverage is stronger when borrowable funds are considered, Wagner wrote.
In assigning the new rating Wagner pointed out that the county is reliant on short-term borrowing. Due to weak liquidity levels and this reliance, continued market access is critical, Wagner wrote. Fitch views this as a negative credit factor.
In early 2012 the county declared a fiscal emergency and developed a budget mitigation plan. Implementation has led to some expenditure reductions and new recurring sources of revenue, Wagner noted. The county government has reduced its employees by 741 since 2012.
The county benefits from a broad and strong economy, a lower than average unemployment rate, and high wealth levels.
The county has manageable debt levels, Wagner wrote. The county has a debt ratio of $4,262 per capita when one includes the debt of other county government entities, like school and fire districts and towns and villages. Fitch considers this moderate. Debt service is a low 4.6% of total government fund spending.
Responding to the Fitch downgrade, Suffolk County director of communications Venessa Baird-Streeter said, “We’re not surprised by this given our fiscal issues.”
The county is planning to sell the Foley Nursing Facility for $23 million, Baird-Streeter said. The facility is costing the county $12 million a year to operate. The sale has been stopped by litigation, she said.
“Suffolk County and the administration is focused on providing stability on our fiscal standing,” Baird-Streeter said.
Suffolk County GO debt is rated A1 by Moody’s and A-plus by Standard & Poor’s. Moody’s has a negative outlook on the debt but S&P has a stable outlook.
The county is selling over $150 million in revenue anticipation notes and bond anticipation notes on April 9. Fitch has given these notes a F1 rating.
Suffolk County covers the eastern most two thirds of Long Island. With 1.5 million residents, it is the largest New York county outside of New York City.
