Suffolk County in New York’s Long Island is expected on Wednesday to sell $105 million of tax anticipation notes.
The county sells Tans annually in anticipation of the collection of unpaid real property taxes or assessments from municipalities and school districts.
The proceeds may be used for the purpose for which the taxes or assessments were levied, according to county spokeswoman Vanessa Baird-Streeter.
Citi will price the notes, which will mature in September 2013.
According to Standard & Poor’s, which has assigned the notes a short-term SP-1 rating, county officials originally planned to issue $90 million of Tans, but increased the amount to $105 million to pay accrued vacation and lagged payroll to employees electing early retirement during the summer.
Officials have reported that the county is down 650 positions since the start of the year through a combination of early retirement, layoffs and attrition.
The rating agency assigned its second-highest short-term rating based on the county’s general obligation guarantee, a statutory set-aside requirement and adequate projected and historical coverage.
Analysts also cited the county’s reliance on market access for additional cash-flow borrowing to pay off previously issued revenue anticipation notes.
In May, the county issued $85 million of Rans, a security it does not usually sell.
“In our opinion, the borrowing is in response to a worsening liquidity position attributable to a prolonged period of fiscal imbalance,” analysts said in a report.
Suffolk County declared a state of fiscal emergency earlier this year, after estimating a budget deficit through 2013 at $530 million. The County Budget Review Office has revised that number down to $419 million.
Fitch Ratings also assigned to the notes its second-highest rating, F1. Analysts cited the county’s cash-flow pressure, but also noted the progress management has made in reducing the deficit.
“Fitch believes the progress to date in reducing the budget deficit demonstrates an improvement in county elected officials’ willingness to address fiscal problems cooperatively,” analysts said in a report. However, they expressed concern that many of the measures have been non-recurring.
Under phase one of its “Budget Mitigation Plan,” the county has amortized $60.3 million of its 2013 pension payment, decreased its workforce and lowered overtime.
Under phase two, it plans to sell its nursing home to a private operator for about $23 million and has negotiated an eight-year contract with the police union, which would save the county an estimated $44 million in salaries and benefits, according to Fitch.
The County Legislature is meeting on Thursday, when it will vote on the sale of the John J. Foley Skilled Nursing Facility.
The Legislature may also vote on the ratification of the police contract, but not until the Budget Review Office completes the review of its fiscal impact, said Michael Pitcher, a spokesperson for the Legislature.
Pitcher said that County Executive Steve Bellone hopes to include the revenues from the sale, as well as the savings from the police contract, in the 2013 operating budget, which has to be submitted by Sept. 21.
Bellone cannot include the revenues in the budget unless they are approved by the Legislature.
Fitch analysts said that if no other actions are taken, and assuming budgeted sales tax growth of 4.6% in 2012, under the county’s phase one and two plans the deficit is projected to decrease to $202 million by the end of 2013.
Phase three of the plan will likely be addressed in the 2013 budget.