March 7 (Bloomberg) -- New York’s Suffolk County, home to Long Island’s Hamptons beach communities, is in a fiscal emergency after ending its budget year with a deficit for the first time in two decades, said its executive, Steve Bellone.
Suffolk has a three-year deficit of $530 million, Bellone said in a statement announcing the emergency on the county’s website. The declaration gives him the authority to withhold as much as 10 percent of each county department’s budget, he said.
“The truth is worse than any of us could have imagined,” Bellone said in the statement, posted yesterday.
The county, with a 2010 population of about 1.5 million, had its credit rating put on review in December by Moody’s Investors Service, signaling it faces a possible downgrade on $1.3 billion of long-term general-obligation debt.
The fiscal emergency won’t prompt an immediate rating action from Fitch Ratings because the negative outlook it placed on the county in November incorporates Suffolk’s "weakened financial condition and heightened credit risk,” Karen Wagner, a Fitch analyst, said today in a statement.
Suffolk has a median household income of $84,506, compared with $55,603 for the state, according to the U.S. Census Bureau.
The county’s 2011 budget ended out of balance by about $33 million and it faces deficits of $148 million in its $2.6 billion budget for 2012 and $349 million in 2013, Bellone said. Pension costs are projected to almost double to $192 million in 2013 from $102 million last year, according to a report by the county’s Budget and Finance Committee presented to Bellone yesterday.
“In the coming days and weeks I will be working with elected officials at all levels of government, including the Legislature, on a mitigation plan to put this county back on a fiscally sustainable path,” Bellone said. “This process will not be easy, it will undoubtedly require difficult and painful steps.”
Moody’s Aa2 rating on the county’s tax-exempt debt, its third-highest level, was put on review due to “our expectation that the county’s financial operations will be challenged by its narrowed cash position, with the potential for further financial weakness without the implementation of proposed midyear expenditure reductions,” analysts wrote in a Dec. 14 report.
The review will focus on the implementation of 2012 budget cuts, the prospect of a long-term balanced budget and improved cash flow, Moody’s wrote. The ratings company said at the time it expected to complete the review within 90 days.
A Suffolk County general-obligation bond sold in 2009 and due October 2028 traded yesterday as high as 105.95 cents on the dollar, down from 108.09 cents on Feb. 8 and higher than 102.19 cents on Jan. 4, the first trade after Moody’s put the county on review, according to data compiled by Bloomberg.
Neighboring Nassau County had its finances taken over in January 2011 by a state oversight board, which ruled the municipality had a budget gap of more than 1 percent of projected spending.
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