Nassau County on New York’s Long Island had its credit rating cut one level by Moody’s Investors Service as the state’s wealthiest county depleted its reserves.
Moody’s reduced its rating on $1.4 billion of Nassau’s general-obligation bonds to A2, its sixth-highest investment grade, from A1. The outlook is stable.
“The downgrade to A2 reflects further weakening of the county’s financial position in fiscal 2011 and the expectation that fund balance will continue to decline in fiscal 2012,” Moody’s said in a news release today.
The finances of Nassau County, with a median household income of about $94,000, have been under the oversight of a state board since 2011 after it failed to balance its budget. Republican County Executive Ed Mangano has refused to raise property taxes to narrow deficits for three straight years, relying instead on job cuts and one-time revenue.
The county’s deficit is projected to decline to $113.4 million this year from $127.6 million in 2011, County Comptroller George Maragos said July 13. The county has $40.5 million of reserves for a budget of $2.8 billion.
Mangano’s 2013 spending plan relies on $64.5 million from revenue increases and cost cuts that may not materialize, according to an Oct. 18 report by the county’s Office of Legislative Budget Review.
Sales-tax revenue has rebounded to prerecession levels and a wage freeze imposed by the oversight board, the Nassau Interim Finance Authority, has helped manage costs.
Brian Nevin, a spokesman for Mangano, blamed the rating cut on Democrats in the county legislature. The lawmakers opposed the executive’s proposal to borrow to pay tax refunds and a plan to let a New Jersey company run the sewer system for 20 years in exchange for a $750 million payment.
“Democrat legislators have refused to cooperate in cleaning up decades worth of debt without raising property taxes,” Nevin said in an e-mailed statement.
Mike Florio, a spokesman for the legislature’s Democratic Caucus, didn’t immediately return an e-mail seeking comment.
Investors in search of higher-yielding securities have looked past the county’s deficits.
A Nassau County general-obligation bond due in April 2034 traded yesterday with an average yield of 3.47 percent, about 0.8 percentage point above a benchmark index of municipals, data compiled by Bloomberg show. The bonds priced April 25 with a 4.1 percent yield, 0.97 percentage point above the index.