Oyster Bay, NY GO Bond Outlook Revised To Positive On Restored Fiscal Stability

Stocks and Financial Services Press Releases Friday March 10, 2017 08:55
BOSTON--10 Mar--S&P Global Ratings

BOSTON (S&P Global Ratings) March 9, 2017--S&P Global Ratings has revised the outlook on Oyster Bay, N.Y.'s general obligation (GO) bonds to positive from negative. We also affirmed our 'BB+' long-term rating on the bonds.

"The outlook revision reflects the steps the town has taken to restore structural balance and begin replenishing its accumulated negative reserve balance," said S&P Global Ratings credit analyst Victor Medeiros. For the fiscal 2017 budget year, the town adopted a budget that included an 11.5% property tax levy increase that is anticipated to generate $24 million in new revenues. In addition, it recently settled labor union contracts that would roll back labor costs by 2% in 2017 and 2018, although they would then be restored in 2019 and raised 1.9% annually in 2020 and 2021.

"We believe these actions, coupled with realistic budgetary assumptions, are sufficient to stabilize fiscal operations in 2017, and over the next two years, could improve budgetary performance, budgetary flexibility, and liquidity factors to levels commensurate with an investment-grade rating," said Mr. Medeiros.

Oyster Bay, with an estimated population of 295,714, is in Nassau County in the New York-Newark-Jersey City metropolitan area.

"We believe the town continues to face budgetary pressures as fixed costs escalate and liquidity remains weak, leaving it vulnerable to financial deterioration, particularly if the business, financial, or economic environment worsens," added Mr. Medeiros. However, stronger revenue and assumption practices, coupled with a roll-back of union salary costs, savings from attrition and retirement, and a substantial tax levy increase, are positive steps in the town's financial management and its ability to achieve structural balance and begin restoring reserves. Over time, a track record of stronger budgetary performance through stronger financial management practices and policies could likely improve the town's overall credit quality and rating.

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