The Nassau County Sewer and Storm Water Finance Authority received stronger ratings than some Long Island-based peers because of a new flow of funds.
The $158 million bond, which will be priced on Wednesday, has been rated AAA by Standard & Poor's and Aa3 by Moody's Investors Service.
The ratings are superior to some other large Long Island government issuers, including Suffolk County, the Long Island Power Authority, and Nassau County itself. Nassau County government's general obligation rating is now A2 from Moody's, A-plus from S&P, and A by Fitch Ratings.
The Sewer and Storm Water Finance Authority bond ratings are an improvement from when it sold bonds in 2008. The bond rating from Moody's is two notches higher than the 2008's underlying rating and the rating from S&P is four notches higher than that underlying rating. The 2008 bond was insured.
For the new Sewer and Storm Water Finance Authority bonds, the local tax receivers will transfer the money to the authority's trustee, Bank of New York Mellon. The trustee will then use the money for the authority bonds, first, and authority operating expenses, second. Finally, the balance will be transferred to the county.
In prior bond offerings from the authority, tax receipts would be used simultaneously for Sewer and Storm Water Resources District bonds as well the authority's own bonds.
"The authority will no longer be responsible for paying debt service on Nassau County general obligation Sewer and Storm Water Resources District bonds," said Nassau County Finance Director Eric Naughton. "The new flow of funds structure, which eliminates the authority's obligation to pay debt service on county sewer and storm water bonds, provides enhanced coverage and protection for the authority's bondholders."
The new bonds will refund $126.2 million in 2004A, 2004B, and 2008A series bonds. They will also include $32 million in new money. The bonds will mature from 2015 through 2034.
Naughton said that debt service coverage would be 6.9 times maximum annual debt service.
Unlike many sewer bonds that are paid with water revenues, these bonds are paid with property tax assessments. S&P's rating "reflects the strength of property tax assessments," S&P analysts Lindsay Wilhelm and Hilary Sutton said. Nassau County has the 12th highest median household income of any county in the country, according the United States Census Bureau.
Wilhelm and Sutton also noted that the flow of funds requires the tax collectors to direct the property tax receipts to the trustees before anything else.
The bonds have provisions that include an additional bonds test equivalent to two times maximum annual debt service, the analysts said.
They noted what they described as "very strong maximum annual debt service coverage from pledged revenue of more than 6 times."
Finally, they said that Nassau County has strong income and wealth levels.
Ramirez & Co. is the senior manager of this deal. Public Financial Management is the financial advisor.
