The credit rating agency S&P Global Ratings has upgraded Suffolk County’s bond rating from ‘BBB+’ to ‘A-‘ with a positive outlook, Suffolk County Executive Steve Bellone announced yesterday.
Earlier this year, S&P Global Ratings upgraded the county’s financial outlook from negative to positive. In this latest report, Bellone said, S&P stated “The outlook reflects our view that if Suffolk can continue passing structurally balanced budgets and maintain its commitment to improving reserves, we could raise the rating further during our two-year outlook horizon.”
Last month, Moody’s Investor Services also revised Suffolk’s outlook to positive, while it reaffirmed the county’s Baa2 issuer rating.
Suffolk County is large, wealthy and growing with relatively modest debt, pensions, and OPEB (Other Postemployment Benefits) liabilities, Moody’s said in an Oct. 25 press release. It noted that the county “historically… relied on the use of non-recurring revenues, deferment of portions of pension payments and significant cash flow borrowing to maintain operations, but had largely eliminated these practices in the last few years and is planning to pay off outstanding pension deferrals in 2022.” However, Moody’s noted, Suffolk’s “reliance on economically sensitive sales tax revenue and potentially on cash flow borrowing are weaknesses.”
The county has eliminated all cash flow borrowings in 2021 and the County does not intend to issue any notes in 2022, a measure that will save taxpayers approximately $10 million next year, Bellone said.
S&P concluded that Suffolk has “an improving financial profile that will likely strengthen if the economy remains resilient and the county adheres to its improved financial practices,” Bellone said.
The county executive said the positive news “validates that our fiscally responsible approach to budgeting is working and moving Suffolk County in the right direction.”
Both ratings agencies noted that the county’s sales tax revenues have rebounded vigorously after the COVID-19 shutdown. Federal coronavirus relief also offset losses due to the economic fallout of the pandemic.
The county made “tough but prudent decisions to maintain fiscal discipline and protect the taxpayer,” despite unexpected crises Superstorm Sandy and COVID-19, Bellone said.
He thanked we Comptroller John Kennedy and the county legislature for working together in a bipartisan fashion throughout the COVID-19 crisis and in the adoption of the 2022 budget.
The 2022 budget included several financial measures designed to protect taxpayers in Suffolk County, which S&P viewed positively, Bellone said:
· Funded the County’s Tax Stabilization Reserve Fund at the highest level in its history
· Paid off $197.2 million in pension amortization debt, generating interest savings of $20.2 million
· Funded $11.8 million of contractual salary deferrals
· Funded $138.3 million of contingency reserves funds for payroll and health care costs, property taxes, and other needs
· Paid off the sale/leaseback of the H. Lee Dennison Building.
These actions will help lower debt service costs and eliminate the need for short-term borrowings, both of which will ultimately save taxpayers tens of millions of dollars, the county executive said.
Bellone said when he first took office the county was facing an accumulated deficit of approximately $500 million and a $200 million annual structural budget gap. Both have since been eliminated, he said. The county consolidated departments, worked with labor unions to obtain significant healthcare expense savings and implemented best practice financial reforms and performance management measures to make government more efficient, according to Bellone.
He said S&P highlighted the county’s reform efforts in its report stating, “the county has managed to find efficiencies by leveraging technology to streamline processes such as payroll and procurement.”
The result of all these efforts was that in 2019 the County achieved a structurally balanced budget with an operating surplus for the first time in more than a decade and has done this now for three consecutive years, Bellone said.
Presiding Officer Rob Calarco and Minority Leader Kevin McCaffrey joined Bellone in praising the county’s efforts to improve its fiscal position.
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