Moody's Drops Credit Rating for Suburban NY County
Friday, May 11, 2012
A credit-rating service acted too soon when it dropped Rockland County's investment status to just above junk level, the county executive said Friday.
Moody's Investor Service noted that the county had failed to enact a sales-tax increase that was assumed in its 2012 budget or to win labor concessions.
It dropped the county's rating three notches on Thursday, from A3 to Baa3.
But County Executive C. Scott Vanderhoef said Friday the county has been working on a contingency plan, with layoffs and service cuts, that will address the $40 million gap in its $702 million budget.
His spokesman, Ron Levine, said that plan would be ready next week.
"It's unfortunate that Moody's did not wait to review our final contingency plan before downgrading our bond rating," Vanderhoef said.
The county, which has about 310,000 residents in the suburbs of New York City, has been hurt by the recession, which has cut sharply into sales tax revenue.
Moody's said it was reacting, in part, to word that the county would not be receiving state permission to increase the county sales tax, currently 4 percent, by 0.375 percentage points.
The tax hike would generate an estimated $14 million a year. The county had planned to use the money to pay off $80 million in bonds that could have reduced the deficit. Without the tax hike, the county may be unable to offer the bonds.
Vanderhoef, a Republican, said the plan failed because state Sen. David Carlucci, a Democrat who would have had to sponsor the measure, "was unwilling to fight for the financial stability of Rockland County."
But Carlucci said Vanderhoef "wants to make the root of the problem - an overly burdensome sales tax - part of the solution." He said the higher tax would prompt businesses to move out of Rockland.
He also said the county executive and county Legislature were playing a "blame game" instead of owning up to overspending.
Moody's also noted that the county has failed to sell a county-owned nursing home that has been a drain on finances.
Two other counties in the New York suburbs are also having fiscal difficulties. Nassau County's finances have been under state oversight for more than a year, and Suffolk County's credit was downgraded by Moody's in March as it battled growing budget deficits.