File photo: Denise Civiletti

Riverhead Town’s credit rating has been upgraded by Moody’s Investors Service from Aa3 to Aa2.

Moody’s took the action yesterday, according to a press release issued by the ratings agency.

The upgraded rating will apply to the town’s new $7.9 million public improvement bond issuance that will fund several Riverhead Water District capital projects and $724,000 of the just-completed downtown parking district construction work, Riverhead Financial Administrator William Rothaar said today.

A better credit rating means lower interest rates on new debt.

“The upgrade of the issuer rating to Aa2 reflects the town’s much improved reserve position over the past several years along with the expectation that these levels will be maintained in the future,” Moody’s said in the press release.

“The Aa2 also reflects the town’s sizable tax base, declining debt burden, but elevated OPEB liability,” Moody’s said. OPEB refers to “other post-employment benefits,” such as health insurance, life insurance and deferred compensation due to employees after they retire. OPEB does not include pension liabilities.

“This is the first time Moody’s has upgraded the Town of Riverhead’s bond rating in over a decade,” Supervisor Yvette Aguiar said. “It is another significant sign of fiscal stability,” she said.

“I would like to thank the town board, my department heads and my financial administrator for working with me to address pandemic-related shortfalls, and reduce operating costs while maintaining and improving the level of services our residents deserve,” the supervisor said in a press release.

Rothaar said today he is very happy about the upgrade. He said it confirms the advice he’s been giving the town has been sound — though “nobody likes to hear what I have to say,” he quipped.

“Many things have happened over the last several years,” Rothaar said. “Sean Walter set the stage, Laura Jens-Smith helped with a couple of union contracts, and Yvette paused on spending in the last year and continued to put money in fund balance in spite of the pandemic,” Rothaar said. “All of that combined brought fund balance ip above 15%, which is what Moody’s wanted to see,” he said.

At the same time, Rothaar said, the town has been paying down its debt, reducing annual debt service costs.

“Sean [Walter] always said he envied whoever would be supervisor in 2023, because that’s when everything would be in tip-top shape,” Rothaar said. “And now we’re almost there,” he said.

The town had to implement some difficult measures to get here, Rothaar said, including staff layoffs and piercing the property tax levy cap during the Walter administration.

Riverhead Town’s credit rating was downgraded from an Aa2 to an Aa3 rating in 2015. At the time of the downgrade, Moody’s cited the town’s use of reserve funds in prior years to offset property tax increases. At that point, the town’s reserves had dwindled to $5 million — representing 8% of the town’s annual revenues.

After former Supervisor Sean Walter took office in 2010, he set out to fix what he called a “structural deficit” in the town’s annual operating budget due to the use of reserves to pay current expenses.

Rothaar said the town is not yet issuing bonds to cover the recent $4.85 million purchase of three buildings on Main Street for the creation of a town square. The town is instead issuing bond anticipation notes to cover that cost on the short-term, as the town hopes to secure grant funding for the town square project, Rothaar said. If by next summer, the town has not been awarded the grants it is seeking, the town can issue long-term bonds at that point, Rothaar said.

Rothaar said Moody’s also indicated it has confidence in the town’s fiscal health going forward.

“The fact that we can see positive movement in the future is great,” he said. “It depends on keeping this course. I need the cooperation of the board — obviously they make the decisions,” Rothaar said. “I’m happy they understand,” he said.

Municipal bonds with both Aa2 and Aa3 ratings are considered “high quality.” Moody’s rates bond issues “Aaa” (best quality, strongest creditworthiness relative to other municipal or tax-exempt issuers), “Aa” (high quality, very strong creditworthiness), “A” (above-average creditworthiness) or “Baa”(average creditworthiness). Bonds in the Aa, A and Baa categories are also assigned 1, 2 and 3 ratings within the ratings category, with 1 being the strongest in each category.

“This was very, very good news,” Rothaar said.

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Denise is a veteran local reporter, editor, attorney and former Riverhead Town councilwoman. Her work has been recognized with numerous awards, including investigative reporting and writer of the year awards from the N.Y. Press Association. She is a founder, owner and co-publisher of this website.Email Denise.