Three straight years of budget surpluses led to a rating upgrade for the nation’s most populous township.
S&P Global Ratings raised the Town of Hempstead, New York, to AA-minus from A-plus, with a positive outlook, citing a fiscal turnaround after experiencing a deteriorating fund balance in 2014.
The Long Island municipality was downgraded three notches by S&P in March 2015 when it used reserves to balance budgets and faced significant education cost increases related to a $22 million settlement for resident tuition payment obligations at Manhattan’s Fashion Institute of Technology.
“The rating action reflects our opinion of the town's recent and projected strong budgetary performance and increased budgetary flexibility,” said S&P analyst Lauren Freire in her June 14 report on Hempstead, which has a population of 766,697 and includes 22 villages and 37 hamlets.
The AA-minus rating and positive outlook also apply to the town’s planned $137.3 million public improvement serial bond sale, $31.1 million of public improvement refunding bonds and $7.6 million of water district serial bonds. The town is planning to use bond proceeds for financing capital projects, legal settlements, water improvements and refunding maturities on previously issued debt.
Freire wrote that multi-million-dollar surpluses the past three years improved Hempstead's reserves to $23.5 million in the 2017 fiscal year from a negative $13.7 million in 2014.
She said the town took action to reverse its deficit burden in 2015 and the next year generated “a sizable surplus” through property tax rate increases that raised an additional $20 million in revenue as well as savings through discretionary spending cuts and retirement incentive packages. Town officials are projecting that the 2017 fiscal year will close with a $14.7 million general fund surplus once financial statements are audited and that spending in the current 2018 operational budget is down $4.1 million, according to Freire.
“The town continues to focus on controlling expenses through numerous internal controls,” said Freire.
S&P cautioned that town’s full valuation is experiencing downward pressure due to ongoing tax appeals. Freire said the town is hopeful that economic development projects such as the recently refurbished Nassau Coliseum and the construction of a 114,000-square-foot Memorial Sloan Kettering cancer facility in Uniondale will help stabilize and grow the property tax base.
“I’m pleased that our financial outlook is positive and I’m confident that the fiscally responsible measures, along with the economic development strategies my administration has been putting in place, will move us toward even more secure footing in the future,” said Town Supervisor Laura Gillen, who took office in January. “My administration, in partnership with the Town Board, is fully committed to streamlining the cost of government and moving transformative economic development projects forward in order to create the best environment for taxpayers.”
Hempstead’s new S&P rating is in line with Moody’s Investors Service, which rates the town’s debt at Aa3 with a stable outlook. Moody’s downgraded Hempstead’s $335 million of outstanding debt in February 2017 citing fund balance struggles.