NEW YORK - Standard & Poor's Ratings Services said it lowered its long-term rating and underlying rating (SPUR) on Rockland County, N.Y.'s general obligation (GO) debt two notches to A from AA-minus based on the county's continued weakening financial position and once-strong reserves. The outlook is negative.
The rating service also assigned its A long-term rating, and negative outlook, to the county's $19.89 million series 2010 GO refunding bonds.
The decline started with the Mirant tax certiorari and bankruptcy filing in 2003; and declines in several major and economically sensitive revenue streams, primarily sales and mortgage tax revenues, which have suffered due to the overall economic downturn, have exacerbated the situation.
In Standard & Poor's opinion, the long-term rating reflects the county's diverse, primarily residential, suburban economic base that participates in the greater New York City metropolitan region; very strong wealth and income indicators, coupled with unemployment that has historically been below state and national rates; and low overall debt burden on a market value basis and manageable additional capital needs.
The county's weak financial position, which continues to carry a negative unreserved fund balance, continues to mitigate these strengths.
"The county's future credit direction will be dependent on its ability to restore stable reserves and return to structurally balanced budgets," said Standard & Poor's credit analyst Danielle Leonardis.
Rockland County's finances have significantly suffered since Mirant, Rockland County's leading taxpayer, filed a tax certiorari claim in 1996 and filed for Chapter 11 during summer 2003. Years of unpaid taxes from Mirant, which totaled an estimated $175 million, have weakened the county's once-strong liquidity and reserves.
To assist in covering these losses, the county has had to issue tax anticipation notes, in increasing amounts over the past few fiscal years, to cover Mirant's failure to pay its taxes to the local school districts, towns, and county. The county is ultimately responsible for making schools and towns whole with regard to property tax collections. Since 2007, however, note borrowing levels have stabilized.
Management has indicated that fiscal 2009, which closed on Dec. 31, will likely close with an operating deficit of between $8 million and $11 million (unaudited) due to the continued decline in sales and mortgage tax revenues, as well as several other revenue streams not meeting budgeted levels, coupled with escalating service demands for residents.
Management expects the unreserved general fund balance to remain negative at an estimated $25.5 million. On the revenue side, estimates have sales taxes coming in $18 million under budget and mortgage taxes, investment income, and fines and fees off by roughly $2 million each. The county's various budget management initiatives it has implemented to offset revenue declines have not been sufficient to offset those declines.
The county's fiscal 2010 adopted general fund budget totals $486.95 million, an increase of 8.10% over the previous year, including a property tax increase of 2.37%. Property taxes are budgeted to account for 12.4% of general fund revenues, in-line with previous years.
