MAHOPAC, N.Y. - Global finance expert Moody’s Investment Service announced last week that the town of has maintained its strong financial rating at Aa1, the second highest rating the firm confers.
The rating is well above average in both New York State and the nation.
“We’re thrilled to announce this continued outstanding Aa1 recognition from Moody’s,” said Supervisor Ken Schmitt. “This strong rating is a testament to our smart fiscal decisions and financial planning. I thank the Town Board, Town Comptroller Mary Ann Maxwell and our entire municipal government team for their hard work and dedication.”
Last week, Moody’s assigned the Aa1 long-term rating to the town’s $5.6 million public improvement (serial) bonds ($1.28 million for highway department machinery and repaving; $1.1 million for the Long Pond Road Improvement District; $1.8 million for Water District 2 repairs; $1.4 million for Water District 9 repairs), and have affirmed an Aa1 rating on the town’s outstanding general obligation limited tax (GOLT) bonds. These are a common type of municipal bond that is secured by a local government’s pledge to use legally available resources, including tax revenue, to repay bondholders.
“The Aa1 issuer rating reflects a moderately sized tax base with strong resident wealth and incomes, very healthy financial position, low debt burden, moderate pension liability but elevated and growing OPEB (other post-employment benefits) liability,” said Nicholas Lehman, lead analyst, Regional PFG Northeast, for Moody’s Investors Service Inc.
OPED refers to the benefits, other than pensions, that a state or local government employee receives as part of a package of retirement benefits
“The absence of distinction between the GOLT rating and the issuer rating reflects both the town board’s ability to override the property tax cap and the full faith and credit pledge supporting debt service, a security feature of all general-obligation debt issued by New York local governments,” Lehman added.
Lehman said that the coronavirus crisis is not a key driver for this rating action.
“Given the town’s revenue makeup, which is backed by property tax revenues which are guaranteed in full, we do not see any material immediate credit risks for the town,” he said. “However, the situation surrounding the coronavirus is rapidly evolving and the longer-term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of the town changes, we will update the rating and/or outlook at that time.”
Lehman said factors that could lead to an upgrade of the ratings include a decline in long-term liabilities, particularly the unfunded OPEB liability, and growth in the tax base valuation.
Factors that could lead to a downgrade of the ratings include contraction of the local economy, material growth in debt and other long-term liabilities and a sustained decline in the operating funds’ reserves.