Moody’s Gives Town a Thumbs-Up
East Hampton Town’s bond rating was upgraded by Moody’s Investors Service earlier this month by one level, from A1 to Aa3, reflecting the rating agency’s assessment of the town’s financial standing and its “stable outlook.”
The rating was issued in advance of the sale on Aug. 15 of just over $2 million in bonds and bond anticipation notes, used to refinance previous notes and to raise money for upcoming capital projects.
Len Bernard, the town’s budget officer, said Tuesday that the rating upgrade enabled the town to obtain a “great” interest rate of 2 percent on the bonds and .43 percent — less than half a percent — on the notes. At a previous bond sale, Mr. Bernard said, the interest rate was set at 2.75 percent. The current rate went down even though rates in general have been increasing, he said.
Rich Tortora, a financial adviser to the town, had calculated the low interest rate would save the town approximately $100,000 over the bonds’ nine-year repayment period, said Mr. Bernard. Going from a single-A Moody’s rating to the highest-tier Aa level “is pretty significant,” he said, “especially with everything that happened here,” speaking of the previous administration’s financial mismanagement, which resulted in an accumulated deficit of $28 million.
Moody’s ratings increase from Aa3 to Aa2, Aa1, and, finally Aaa, designating the highest possible financial standing.
East Hampton’s upgrade, Moody’s wrote in its analysis, “reflects improvement in the town’s financial position over the past three years, the result of conservative budgeting and strengthened financial management practices. The rating also incorporates the town’s significant deficit financing as well as a moderate and shrinking debt burden and sizeable tax base characterized by strong wealth and income levels.”
“The stable outlook reflects our view that the town’s financial position will continue to stabilize given strong budgeting and formal policies to maintain ample reserves.”
Other positive attributes cited by Moody’s were “strong management with demonstrated ability to restore financial flexibility” and “above-average wealth levels with sizable tax base.”
The town’s “challenges,” according to the report, include “above average” spending on debt service as a percent of budgetary spending, and the need to maintain “balanced financial operations amidst rising spending pressures and limited revenue-raising flexibility.”
The conclusion reflects the agency’s view that “the town’s financial position will continue to stabilize.” Growing cash reserves, an indication of continued improvement, could result in a better rating, Moody’s said.
Among the capital projects now funded through the recent bond and note sale are road repaving and sidewalk projects, the purchase of new police cars and a new garbage truck, refurbishment of town docks and of the comfort station at the Atlantic Avenue beach in Amagansett, and repairs and renovations to the East Hampton YMCA RECenter building.