Moody's Investors Service said it has downgraded the rating on the village of Suffern, N.Y.'s outstanding general obligation debt to Baa1 from A2, affecting approximately $7.3 million of rated bonds.
The outlook remains negative. The bonds are secured by the village's GO pledge subject to the state's Property Tax Cap - Legislation (Chapter 97 (Part A) of the Laws of the State of New York, 2011).
The double-notch downgrade to Baa1 reflects the expectation that the village will continue to experience significant financial stress over the medium term. Short-term efforts to improve the village's available reserves from their current negative levels (-$115,000 at the end of fiscal 2012) will not substantially ameliorate the ongoing pressure applied by the water and sewer funds, which together owe the general fund $1.3 million and require annual financial support.
The weakness in the village's finances is exacerbated further by very narrow liquidity in the general fund and both enterprise funds. In addition, the downgrade incorporates the village's below-average debt burden and moderately sized tax base with above-average wealth levels
The negative outlook demonstrates a lack of confidence that the village's finances will materially improve in the short term.
Given management's limited plan to restore its finances and general aversion to tax and enterprise rate increases, the village could experience additional financial pressure. Further deficits in the general fund could result in additional ratings movement.
