Suffolk County officials last week confirmed that the county's 1992 fiscal year deficit has grown to at least $91 million, prompting concerns of a cash-flow crisis and a possible credit-rating downgrade.
Charles K. Stein, deputy county executive for finance, said Suffolk County Executive Robert J. Gaffney will disclose a plan this week to address the county's budget deficit, which officials had previously pegged at $55 million.
A spokesman for Mr. Gaffney said the plan will include a number of options both Mr. Gaffney and the County Legislature will consider by the middle of the week.
Although Mr. Gaffney has faced budget problems since taking office Jan. 1, the estimated size of the deficit took on even greater significance last week when the county disclosed the larger gap.
The county said a year-end audit performed by the accounting firm of Deloitt & Touche indicated that Suffolk recorded a revenue shortfall of about $35 million in the 1991 fiscal year that ended Dec. 31.
The county must close that deficit in the current fiscal year. Mr. Stein said without a plan to generate additional revenues, the county could run out of cash in late summer or early fall.
Although Mr. Stein said Suffolk will take the necessary steps to prevent a full-blown cash shortage, Suffolk's financial problems have sparked a noticeable level of concern from two rating agencies.
Michael L. Johnston, vice president and manager at Moody's Investors Service, said the agency will evaluate Suffolk's credit rating after the county releases its financial plan.
Mr. Johnston said Moody's officials are concerned that the county may not be able to present a fiscal plan that ensures a structural balance, in which revenues match expenses on a long-term basis. Moody's rates Suffolk County's general obligation bonds Baal.
"In recent years, the county has had difficulty dealing with its" budget problems, Mr. Johnston said. "So we will be looking at a conservative plan that deals with the problem."
Standard & Poor's Corp., which rates Suffolk GOs BBB, has placed the securities on CreditWatch with negative implications. Richard J. Marino, vice president for Standard & Poor's, said any time "a gap increases from $55 million to $91 million in a number of days, that raises concern." Mr. Marino also said Suffolk must submit a conservative financial plan to close the gap and balance its 1993 budget, or face a rating downgrade.
Fitch Investors Service rates Suffolk County an A, with a stable credit trend.
Suffolk officials have given little indication how they will package a resolution to their fiscal problems.
The county in April passed an omnibus bill designed to address the then-$55 million budget gap. The plan, however, may contain several holes because it called for a refinancing of a lease agreement with the state Dormitory Authority, which likely violates federal tax laws, Dormitory Authority officials said.
But Mr. Stein said the county is considering a wide range of revenue-producing options to make up for any change in Suffolk's financial position, including sale and leaseback transactions, a tax increase, and a general obligation bond issue of up to $91 million.
County officials are scheduled to meet with the Dormitory Authority today to discuss a proposal in which the authority would sell bonds to finance the acquisition of the county's Riverhead Court Complex. Mr. Stein said details were not available.
