Standard & Poor's Ratings Services said it lowered to BBB-minus from A-minus its underlying rating on Amityville, N.Y.'s general obligation debt and placed the rating on CreditWatch with negative implications.
"The downgrade is due to the continued deterioration of the village's financial position and the absence of a meaningful plan to reverse the trend," said Standard & Poor's credit analyst Hilary Sutton.
"The CreditWatch action reflects concerns about the village's ability to repay its $850,000 tax anticipation note maturing May 24, 2013, and $600,000 bond anticipation note maturing May 29, 2013, due to a weak liquidity position and our opinion of potential market access risk," said Sutton. "While we do not rate these short-term instruments, we believe the weak liquidity position, which could cause this risk of nonpayment, is central to the village's long-term credit fundamentals."
The BBB-minus rating reflects the village's: significant drawdown of general fund reserves since fiscal 2008, resulting in a deficit balance of $742,000 at the end of fiscal 2012; constrained general fund liquidity, exacerbated by Hurricane Sandy, resulting in the need for cash flow borrowing; lack of a meaningful plan to restore general fund reserves; and high fixed costs, revenue pressure, and a limited ability to cut personnel costs given already-reduced staffing levels.
Offsetting factors include the village's good access to employment opportunities in the New York City metropolitan area, strong economic indicators, and willingness to raise property tax revenue.
Amityville's financial position has deteriorated significantly with the posting of general fund drawdowns in three of the past four audited fiscal years. The net effect is a general fund deficit of $742,000 at the close of fiscal 2012 (5.2% of expenditures). This has declined from a positive $1.5 million unreserved general fund balance (12.3%) at fiscal 2008 year-end and the village will continue to face significant pressure in light of property tax limitations, high fixed charges, and limited ability to reduce personnel costs.
The village is located in southwestern Suffolk County on Long Island, about 40 miles east of New York City, and has an estimated population of 9,400.