The Town of Ramapo, N.Y. took a two-notch downgrade Wednesday from Moody's Investors Service, which cut it to A3 citing "increased risk" from federal charges that have resulted in a near-term management disruption.
The downgrade impacts $146 million in debt. On April 15, Moody's had placed Ramapo's A1 rating on review. That action came the day after federal fraud charges were brought against town officials alleging misstatements of financial reporting to finance a $60 million minor league baseball stadium. The indictment spearheaded by U.S. attorney Preet Brahara includes 22 counts of wire fraud, securities fraud and conspiracy to commit securities fraud against Town Supervisor Christopher St. Lawrence as well as Aaron Troodler, former executive director of the Ramapo Local Development Corp., which issued bonds for the stadium. Town Attorney Michael Klein and Deputy Finance Director Nathan Oberman were also charged.
"The downgrade to A3 reflects the degree of increased risk stemming from the charges brought by the U.S. Justice Department and the SEC, which have resulted in near-term disruption in management and a likely delay in financial reporting and disclosure," said Moody's analyst Tiphany Lee-Allen.
Moody's also revised its outlook on Ramapo to developing from negative because of uncertainty surrounding the eventual outcome of the federal charges with a chance that the town's financial position could be "materially different" than previous audited financial statements have shown. Lee-Allen said that Ramapo, which is in Rockland County 25 miles north of New York City, is still rated investment grade in large part to having a sizeable tax base with above-average wealth.
"The town's financial position has been pressured, but has been slowly improving, based on updated information from the town," said Lee-Allen. "The rating also recognizes Ramapo's continued pension amortization in 2016 and 2017, providing near term budget relief and its debt profile which, although moderately leveraged, includes contingent liabilities related to guaranteed enterprise debt."
