County's bond rating drops
County Executive: Moody's sends message that county is draining its surplus
GOSHEN — Moody's Investors Service downgraded Orange County's bond rating by two notches, to Aa2, and asserted that the county has a negative financial outlook, announced the office of the county executive, Steve Neuhaus, on Friday, March 14.
Moody's ranks the creditworthiness of borrowers using a standardized ratings scale which measures expected investor loss in the event of default.
According to Neuhaus' statement on Friday:
"Moody's noted that the county has drawn significantly from its reserve funds and that the negative outlook assigned to the county reflects the expectation that the reserve draws will continue in the near-term. Moody's noted the draw of those dwindling reserves causes 'significant pressure' on the county's financial rating. They left open the possibility of further ratings action if steps are not taken to stabilize county finances.
"Last year, the Orange County Legislature's financial consultant, O'Connor Davies, warned of a need to develop a multi-year budget plan, noting,
'As we have stated in previous years, the County has been successful in regenerating fund balance. This trend has reversed itself during the last two fiscal years, 2011 and 2012. The County should be cognizant of this going forward and consider a multi-year budget plan.'"
Neuhaus had earlier in the week warned that he was expecting a "catastrophic" drop in the rating. But while no longer Aaa, the "highest quality" credit and "lowest risk" in its long-term ratings, Orange County is still rated of "high quality" and "low risk," and shares with Aaa a short-term rating of Prime-1, "Best ability to repay short-term debt." B ratings reflect the presence of at least some speculative elements and credit risk. Still, Neuhaus pledged action to bring the county's rating back up.
"Today Moody's acted on and confirmed what they have warned in the past," he said in his statement. "Orange County's finances have deteriorated, and will continue to decline without remedial action. Both the Legislature's financial consultant and the credit-rating agency have identified the same problem — the need for a real plan, not short-term budgeting, to ensure the future financial integrity of our county. Just as our families and our small businesses make tough choices, so must our government. If we do not take aggressive actions to cut costs, we face a budget gap of at least $60 million next year. By working together to make those decisions today, we will have the wherewithal to grow our economy and invest in the essential services county residents depend on. In my State of the County Address on March 18, I will give the county Legislature the opportunity to advance job creation and ensure a multi-year balanced budget for Orange County."
Neuhaus said he will cover this ground in State of the County address scheduled for 6 p.m. on Tuesday, March 18, at the Orange County Emergency Services Center, 22 Wells Farm Rd., Goshen. He said he plans will speak about three topics: "the fiscal mess Orange County inherited as a result of years of inaction, the difficult choices ahead, and the bright future we can realize by working together to solve these problems."
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