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East Hampton Makes the Good Life a Little Better With Bond Sale

  • New York beach getaway to sell $23 million of bonds Tuesday
  • Moody’s raised town to Aa1, second-highest investment grade

As the season for wealthy Manhattanites and Wall Street elite to gallivant on their Hamptons summer playground begins to wind down, one town -- a second home to celebrities such as Martha Stewart and Jon Bon Jovi -- is ramping up spending to improve its already illustrious landscape and stretch of exclusive beaches.

New York’s Town of East Hampton, encompassing 70-square-miles on Long Island’s south fork, is selling $23 million of bonds Tuesday through a negotiated sale. The beach town is fresh off of an upgrade from Moody’s Investors Service, as the credit arbiter last week raised the town one step to Aa1 -- the second-highest investment grade -- restoring the town to its highest rating ever, last achieved in 2003.

The upgrade reflects the town’s "improving financial position as a result deficit financing, ongoing conservative budgeting and strengthened financial management practices," Moody’s analyst Tiphany Lee-Allen said in a report, expecting East Hampton’s financial position to continue to improve as it carries a positive outlook. Improvements to the Montauk shellfish hatchery dock, construction of town-owned dock pilings and the purchase of storage sheds for lifeguards are among the use of the proceeds.

The offering includes $7.7 million of long-term bonds, $11.1 million of short-term notes, and $4.2 million to refund older, higher-rated debt, which the town estimates will result in savings of hundreds of thousands of dollars over the life of the bonds. East Hampton sold debt last August when 10-year tax-exempt securities priced at a yield of 2.25 percent, or 0.02 percentage point below benchmark debt, data compiled by Bloomberg show.

Light supply and high demand for New York-issued bonds should continue to drive "aggressive" pricing in Tuesday’s deal, said Howard Cure, head of municipal research in New York at Evercore Wealth Management, which holds some East Hampton debt among its $6.3 billion of assets. However, as Wall Street bonuses could drop as much as 15 percent this year, Cure is wary of the impact on the town, since a majority of its residents do not live there year-round.

"What does that mean for the purchasing of second homes and property values?” Cure said. “How vulnerable is East Hampton to declines in the New York metropolitan area economy?"

Since supervisor Larry Cantwell took office in January 2014, the town expects to reduce its total debt burden by more than $12 million, according to its most recent budget, said Richard Tortora, who serves as an adviser to East Hampton as president of Capital Market Advisors LLC.

"This has been a goal of theirs to reduce outstanding debt," Tortora said. He expects the recent upgrade to drive some concession in yield in Tuesday’s deal.

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