Standard & Poor's Corp. yesterday removed Suffolk County. N.Y., from Creditwatch with negative implications and affirmed its BBB rating on about $270 million of the county's uninsured general obligation debt.
The rating agency also said, however, that Suffolk's credit outlook "remains negative" because of challenges that county officials face in balancing the county's 1993 fiscal year budget, which begins Jan. 1.
In December 1991, Standard & Poor's alerted the investment community that the county's fiscal health had begun to fail when it put Suffolk on Creditwatch. But in recent months, the county pulled itself out of the rating agency's doghouse by taking several steps to stabilize its credit situation, Standard & Poor's said.
These steps included the closing of a $75 million fiscal 1992 budget gap, the retirement of a $36 million 1991 budget shortfall through an upcoming sale of budget notes, and a stabilization" of the county's cash position, the rating agency said in a press release.
The rating agency also said the county is projecting a $6 million surplus in its 1992 budget.
"The [1992] gap was closed primarily through a combination of administrative actions, one-shot revenues, and expenditure savings "Standard & Poor's said in the release.
"These events," the statement continues, "combined with cooperative sharing of budget and cashflow information between elected officials, have resulted in a stabilization of the cash, position and aversion of recurring cash crises, which were characteristic of the county's cash management last year."
Suffolk County Comptroller Joseph R. Caputo said in a telephone interview yesterday that the rating affirmation was "good news for Suffolk County," and that the county will be in a position to receive upgrade from Standard & Poor's sometime in 1993.
Suffolk's general obligation bonds are rated Baal by Moody's Investors Service and A by Fitch Investors Service. Mr. Caputo said the rating action by Standard & Poor's will have the immediate effect of saving the county about $312,000 on a $55 million note sale scheduled for next week.
These tax anticipation notes, known as D-tans, will provide the county with cash before it receives delinquent tax payments later in 1992. The county will issue the securities in a negotiated sale through a syndicate led by Chemical Securities Inc. Chemical also provide a letter of credit on the deal.
Mr. Caputo acknowledged that the county faces tough times ahead. He said the county's budget gap in 1993 could rise close to $ 100 million without a property tax increase and further budget cuts. But Mr. Caputo said he expects the county to take steps that would easily cut the projected gap in half "without too much problems."
On Sept. 18, the rating agencies and the municipal market will get their first glimpse of how officials in Suffolk plan on paying their bills in the future when County Executive Robert J. Gaffney submits his 1993 budget.
In its press release, Standard & Poor's underscored the uncertainty the county faces in 1993, including a sour economy and the replacement of about $90 million in onetime revenues it used to close its 1992 budget.
In addition, the county's deficit-closing plan will have only a negligible revenue effect in fiscal 1993. The county received state approval to issue up to $36 million in budget notes for a 1991 shortfall and raise its sales tax half a cent, to 8.5 cents.
Suffolk can use only part of the sales tax increase for operational needs in 1993, however, because most of the revenues from the additional taxes must service the cost of the budget notes.
