Suffolk County, N.Y., Upgraded to BBB By Standard & Poor's; Budget Pact Cited
Suffolk County, N.Y., yesterday became a full-fledged member of the investment-grade club when Standard & Poor's Corp. upgraded its general obligation bond rating to BBB from BB, affecting about $270 million of uninsured debt.
The two other rating agencies maintained the county's investment-grade bond ratings through its recent budget turmoil. Moody's Investors Service rates Suffolk County GOs Baal and has them under review. Fitch Investors Service rates them A.
Standard & Poor's said the upgrade reflects the "full approval of the county's fiscal stability program and the expectation that the county executive and legislature will agree to and adhere to a credibly balanced budget for fiscal 1992," which begins Jan. 1.
The upgrade is expected to give a slight boost to the marketing efforts for a $102 million court facilities refunding bond issue being sold by the New York State Dormitory Authority on behalf of the county next week, said an officer of PaineWebber Inc., the deal's senior manager and bookrunner.
The authority first sold the court facilities bonds in 1986 to finance the construction of the John P. Cohalan Court Complex. Budget relief for the county, which pays debt service on the bonds, will be partially achieved by freeing up debt service reserves. Standard & Poor's rates these bonds A-minus and has them on CreditWatch with negative implications.
Standard & Poor's lowered the county's GO rating to double-B on June 24 and placed it on CreditWatch with negative implications because of "a rapidly deteriorating cash position - which threatened the repayment of $51 million of notes - and lack of a plan to address the problem on a short-term and long-term basis."
In late August, however, the rating agency shifted its CreditWatch to "positive implications" in anticipation of the 18-member county legislature and county executive Patrick G. Halpin agreeing to a $150 million fiscal stability plan.
Mr. Halpin yesterday said the upgrade "is a vote of confidence for the finances of the county."
But he added, "Frankly, this should have been done sooner."
When the county's deficit reduction program was adopted in the late summer, he said, that "should have been sufficient enough to upgrade us."
He said the rating agency's "actions in downgrading Suffolk County were really quite extreme and unfair.
"When you compare our credit rating with New York City and Connecticut and other municipalities that continue to struggle with budget deficits, it seems that they could have upgraded us," said Mr. Halpin, a Democrat running for a second term in November.
But Maury Cooper, a senior vice president with Standard Poor's, said the agency did not move on the upgrade until all the pieces of the county's fiscal stabilization plan were in place.
Ms. Cooper said a big part of the plan was the bond refinancing, which is expected to provide the county with $42 million in budget relief in fiscal 1991 and $9 million in fiscal 1992. That piece was not approved until last week, when the board of directors of the dormitory authority voted for the refinancing, Ms. Cooper added.
Also, Ms. Cooper said the agency wanted to review the county's proposed fiscal 1992 budget.
Late last month, Mr. Halpin presented his proposed $1.3 billion fiscal 1992 budget. The budget goes into effect when it is approved by the county legislature, which is controlled by Republicans. The proposed budget does not call for a property tax increase, but does call for salary freezes on county workers. The budget would be financed in part through a recently approved half-cent rise in the county sales tax by the state Legislature and proposed increases in user fees for a myriad of county services.