Rockland County, N.Y., bond deal sees strong demand after rating boost
New York’s Rockland County achieved record low interest rates for a more than $40 million bond transaction following a credit upgrade that reflected its recent fiscal discipline.
Rockland issued $24.1 million in Series B refunding bonds Thursday in a negotiated deal led by Roosevelt & Cross that priced at a true interest cost of 1.35828% and net interest cost of 1.4998%. The transaction provided around $4.7 million in present value saving for bonds sold in 2010 and 2012. Assured Guaranty insured about half of the refunding deal: the bonds maturing between 2027 and 2032.
The 320,688-population county, located 25 miles north of New York City, also sold $20 million of Series A bonds Tuesday to J.P. Morgan Securities in competitive bidding at a TIC of 1.3341669% and NIC of 1.4369396%. The bonds will fund various capital projects around the county.
Stephen DeGroat, Rockland’s commissioner of finance and budget director, said the one-notch credit upgrade by Moody’s Investors Service to A2 from A1 ahead of the sale played a big part in sparking investor demand for both deals. Moody’s lauded the county for its budgetary practices the past few years that bolstered reserves leading into the challenges of the COVID-19 pandemic.
“To get a rating increase in this environment it says a lot to the investors out there that Rockland is very conservative with budgeting and is doing the right things,” he said. “It has to be a 10 to 15 basis point saving just from the credit upgrade alone.”
Rockland finished 2019 with a $60 million unreserved fund balance, its highest in nearly 20 years, and a $28 million surplus, DeGroat said. The county has rebounded from 2013, when its deficit hit a $138 million high, and its general obligation bonds were rated four notches lower by Moody's at near-junk Baa3 with a negative outlook.
The Moody’s credit boost came a year after Fitch Ratings upgraded Rockland’s GOs to A from A-minus and assigned a positive outlook, citing improved budget practices. S&P Global Ratings also raised Rockland’s long-term debt in June 2019 by two notches to A-plus from A-minus.
Moody’s analyst Robert Weber said Rockland would likely avoid any “material” near-term credit risks despite suffering some revenue declines due to the COVID-19 pandemic thanks to healthy reserves. Sales tax collections for 2020 have been down 8% compared to last year and Gov. Andrew Cuomo has held back 20% of state aid to the county, which Weber said creates budget pressure.
“The county’s financial position will be challenged through the end of the year but will likely remain relatively stable given conservative budget management,” Weber wrote in an Aug. 24 report. “Even if reserves were to decline by $60 million, which is unlikely, available fund balance would still be higher than any year between 2001 through 2017.”
Rockland County Excutive Ed Day asked the legislature to push back the deadline for a proposed 2021 county budget to Oct. 23 from Oct. 1 in order to allow more accurate revenue projections. the county will receive sales tax disbursements from New York State on Oct. 1.
The county executive is also seeking legislative approval to sell the county-owned Sain Building in New City and utilize proceeds to offset financial losses caused by the virus. The county received a $4.51 million purchase offer for the building in March 2016, according to Day.
Rockland’s previous deficit was driven largely from providing $95 million in subsidies to the county’s hospital between 2011 and 2014. The 2015 closure of the facility saved the county more than $20 million of annual general fund spending. Property tax rate increases and significant workforce cuts also helped plug the gap.
The county issued $96 million of deficit financing bonds in May 2013, authorized by New York State under condition it would remain under budgetary oversight by the state comptroller until 2024.