Riverhead Town is in a “solid financial position,” according to Moody’s Investors Service, which issued its annual comment on the Town of Riverhead’s fiscal outlook earlier this month.
Riverhead Town retained its Aa3 rating, according to Moody’s investment analysis report.
“Riverhead has a strong credit position, and its Aa3 rating is level with the U.S. cities median of Aa3,” the Moody’s report said.
“The key credit factors include a positive wealth and income profile, a large tax base and a light debt burden,” the report said.
Moody’s noted that the town’s “net direct debt to full value,” which it put at 1.3 percent, “fell materially between 2012 and 2016.”
The town’s economy and tax base are “very healthy and are relatively favorable in comparison to the assigned rating of Aa3,” the report said. Riverhead’s full value of over $5.7 billion is “stronger than other Moody’s-rated cities nationwide.”
Riverhead’s cash balance as a percent of operating revenues (14.1 percent) is “much weaker than the U.S. median and contracted between 2012 and 2016,” the report stated.
“Also, the fund balance as a percent of operating revenues (7.4 percent) is far below other Moody’s-rated cities nationwide,” the company said.
The analysis does not include the results of operations for fiscal year 2017, which ended Dec. 31.
According to the town’s 2017 annual update document filed with the Office of the State Comptroller, Riverhead’s general fund balance grew by $560,893 last year.
Riverhead Supervisor Laura Jens-Smith, who during her was critical of her predecessor’s fiscal policies, particularly as concerns the town’s need to pierce the tax cap, its debt burden and the depletion of the fund balance to balance the budget, described the report’s findings as “status quo” for the town.
Former supervisor Sean Walter said the Moody’s report was “heartening” and validated for him the value of the practices he put in place during his eight-year tenure, especially his “pay-as-you-go” rule requiring town departments to pay for expenses and purchases out of their regular operating budgets.
“The town is well on its way to firm financial footing,” Walter said this morning.
Walter said the town added to its fund balance in 2017 for the second consecutive year, reversing a trend he said started in the 1990s, with the exception of moneys paid to the town in connection with the sale of property at the Calverton Enterprise Park.
Moody’s downgraded the town’s bond rating in 2015, from Aa2 to Aa3. At the time, Moody’s cited the town’s “deterioration of general fund reserves” due to annual fund balance appropriations. Riverhead had an Aa2 rating from Moody’s since January 2008.
Until 2015, the town has drawn on its reserves — funds that saw an infusion of cash in land sales and contract option payments associated with the Calverton Enterprise Park — to balance its annual operating budget and offset tax increases for years. Though the analysts downgraded the town, they noted “positively” that the 2015 budget was balanced without dipping into the reserve fund, which they said was “narrow.”
“Future ratings reviews will factor management’s ability to balance the budget through revenue enhancements or expense reductions and begin to build reserves to historic levels,” Moody’s said in 2015.
Riverhead Town has not gone to the bond market for financing since 2012, when it refinanced $38 million in public improvement serial bonds to take advantage of lower interest rates. In 2011, the town sold $22 million in new bonds which covered landfill closing and capping costs, the purchase of the Town Hall West building on Pulaski Street, improvements to the Riverhead Water District and road paving work by the highway department.
A municipality’s bond rating affects the interest rates it will pay on new borrowing. Municipalities with higher bond ratings get better interest rates.
Riverhead will need to borrow money again to finance water district improvements. The anticipated bond issue for those improvements will be about $5.5 million, according to town documents, including roughly $4.3 million for the new storage tank and pump station at Plant 17 on Tuthill’s Lane.
Jens-Smith said today that the new borrowing will take place later this year.
Moody’s will likely issue a ratings report on Riverhead Town in advance of that issuance.
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