Moody’s Investors Service last week revised its outlook on Nassau County to negative from stable ahead of a $210 million note sale this week. Moody’s said in a rating report that it expects the Aa3-rated county’s financial position will decline further in 2010.

“Structural gaps are likely to increase given recent changes to the county’s multi-year financial plan, which decreased recurring revenue sources and replaced these with expenditure savings targets which management may be challenged to achieve,” Moody’s said.

It said Nassau will remain challenged in the near term due to reliance on economically volatile sales tax revenue, higher pension costs and the end of federal stimulus aid.

On the positive side, Moody’s cited the county’s proximity to New York City, its wealthy demographics, and housing values that “rank among the highest in the country.”

Moody’s assigns the revenue anticipation notes its MIG-1 short-term rating. The county plans to competitively sell the notes tomorrow in two series. Public Financial Management Inc. is financial adviser. Orrick Herrington & Sutcliffe LLP is bond counsel. Nassau also plans to competitively sell $90 million of taxable Build America Bonds and $8 million of tax-exempt bonds next week.

The affluent Long Island county has a population of about 1.3 million and borders New York City to the west and Suffolk County to the east. Nassau has about $1.2 billion of outstanding debt that it has issued or guaranteed.

Fitch Ratings rates Nassau AA-minus with stable outlook and rates the notes F1-plus. Standard & Poor’s rates the county A-plus with stable outlook and rates the notes SP-1-plus.

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