Moody’s Investors Service on Thursday downgraded to Baa3 from A3 Rockland County’s $240 million of general obligation debt and placed the rating on review for downgrade.
The three-notch downgrade puts Rockland County’s GOs at the lowest investment grade rating.
“The downgrade of the long- and short-term ratings reflects a significant budget gap of more than $40 million in the county’s current year, placing heavy pressure on its financial operations and liquidity,” Moody’s analysts said in a report.
Rockland County is located 15 miles northwest of Manhattan and is considered a part of the New York City Metropolitan Area.
The county had developed a plan to close the gap, but has failed to gain state approval for various revenue enhancements, including an increase in sales and other taxes, the report said.
Pending approval from the state, the county will issue $80 million in deficit reduction bonds.
“The county may face difficulty in accessing the capital markets to refund its [bond anticipation notes] and issue new cash flow notes in June, and is likely to incur significantly higher interest costs for the issuances of these notes,” analysts said.
The review for downgrade reflects Moody’s belief that the county will be severely challenged to close its current year budget gap.
Failure to implement realistic revenue enhancements and expenditure reductions, lack of state support or approval, and difficulty accessing the market could make the county’s rating go down, Moody’s said.