Rockland County, New York, had the rating on its general-obligation bonds cut three levels to the lowest investment grade by Moody’s Investors Service because it hasn’t closed a deficit of more than $40 million.
Rockland, about 30 miles northwest of New York City with a population of about 312,000, had the rating lowered to Baa3 from A3. The rating company placed $240 million of debt on review for further cuts and warned that the county may face difficulty borrowing in June for cash flow and refunding short-term notes.
“Without this emergency borrowing, they’re planning to be $30 million in the red by the end of the year and almost out of cash by June,” Rob Weber, a Moody’s analyst, said in a telephone interview.
The rating cut comes three days after state Senator David Carlucci, a Democrat, said he opposed a county plan to increase sales taxes by 0.375 percentage point. Rockland also hasn’t won state approval to issue $80 million of deficit bonds and failed to get $18 million in labor concessions or sell a nursing home facing a $12 million deficit, Moody’s said.
Rockland joins other New York City suburban counties confronting financial distress. Nassau, on Long Island, had its finances taken over by a state oversight board while the executive of neighboring Suffolk has declared a fiscal emergency, triggering 10 percent cuts in department budgets.
Rockland County Executive C. Scott Vanderhoef, a Republican, said in a statement that he was disappointed by Moody’s decision and pinned the blame on Carlucci’s opposition to the sales-tax increase. In New York, counties need the state Legislature’s approval to raise sales taxes.
“Moody’s downgrade is a direct result of his unwillingness to work with us to close the budget gap,” Vanderhoef said.
Vanderhoef said that he’s working on a contingency plan with the Democratic-controlled county Legislature to close the deficit and that negotiations with the county’s biggest union are continuing.
“It’s unfortunate that Moody’s did not wait to review our final contingency plan before downgrading the bond rating,” he said.
In a telephone interview, Carlucci said raising the sales tax would drive shoppers to New Jersey, hurting local businesses. The county has mismanaged its finances by relying on optimistic sales-tax revenue forecasts and failing to cut spending, he said.
“Giving them this sales-tax increase will not solve the problem,” Carlucci said. “It will make the problem worse. If they were serious, they would have come up with a contingency plan already.”
Dealers today traded $50,000 of county general-obligation bond maturing in eight years at about 104 cents on the dollar to yield 2.4 percent. Yesterday, $100,000 of the same bonds traded at 103 cents on the dollar to yield 2.5 percent.
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