Moody’s Confirms City’s Bond Rating Long Beach “no longer under review for downgrade” [PRESS RELEASE]

Long Beach, NY – Moody’s Investors Service has confirmed the Baa3 the rating on the City of Long Beach’s (NY) $48.3 million outstanding general obligation debt. Moody’s has stated that the City’s rating “is no longer under review for downgrade.”

“I’m extremely happy to hear that we are no longer living under the constant threat of being downgraded to junk bond status,” said City Council President Fran Adelson. “Moody’s recognition of our efforts to stabilize our finances is an important step towards restoring confidence in the City going forward.”

“Moody’s rating review praised the City for the steps we have taken thus far to reverse years of fiscal mismanagement by the prior administration, commented City Manager Jack Schnirman. “We are happy that Moody’s praises our new budget for stabilizing the City’s financial position. And we understand that Moody’s will keep a close watch as we implement our balanced budget plan.”

The report states that the City’s “NEW MANAGEMENT HAS REPORTEDLY STABILIZED THE CITY’S FINANCIAL POSITION.”

The detailed credit discussion emphasizes that the 2012-2013 budget is “more conservative.” It mentions that “economically sensitive revenues, a primary driver of the city’s deficit, have been significantly reduced in the fiscal 2013 budget.  Sales tax (which represents 3% of revenue) was reduced by 8% from the fiscal 2012 budget, utility taxes (2%) were reduced by 51%, parking fees (1%) were reduced by 58%, and mortgage taxes (2%) were reduced by 40%. These revenues have been brought closer in line with what the city has historically received.“

Moody’s also gave the City information concerning its outlook for the future, stating “we will focus on the city’s ability to access the capital markets for short-term cash flow borrowing and deficit reduction bonds, as well as management’s ability and willingness to improve the city’s financial position and liquidity.“

The following is a list of what could cause the rating to go up or down:

WHAT COULD CHANGE THE RATING – UP (REMOVAL OF NEGATIVE OUTLOOK):

  • —Demonstrated ability to manage near-term cash shortfalls
  • Continued ability to access the capital markets for additional cash flow note and deficit bond issuances
  • Further implementation of newly budgeted cost controls and revenue enhancements to return to structural balance

WHAT COULD CHANGE THE RATING – DOWN

  • Failure to execute on new budget’s plan to return to structurally balanced operations
  • Further liquidity declines.

Additionally, Moody’s stated that the City’s debt burden is “expected to remain manageable.” The report indicated that “the overall debt burden, which includes overlapping obligations of Nassau County and Long Beach City School District (rated Aa2), is slightly below average at 2.2%.” The City does not have plans for any significant new long-term debt issuance over the next two years.

“In less than six months, we’ve stopped the bleeding, cut spending, cut overtime, shrank the workforce, passed a budget that eliminates the City’s annual operating deficit – and now Moody’s has confirmed that we are on the road to recovery,” stated Schnirman.

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3 thoughts on “Moody’s Confirms City’s Bond Rating Long Beach “no longer under review for downgrade” [PRESS RELEASE]”

  1. I caution readers that Moody’s views, which have been wrong before in any event, are not a sign of the end of the “Long Beach Fiscal Crisis”. For example, if LB can simply keep raising taxes (and fees) on its residents to meet operating expenses, Moody’s may be satisfied with LB’s management. That, of course, says nothing about the short term and long terms impacts of raised taxes on the citizens. It says nothing of the accrued termination payout number ($23 mm and counting) that at any time can throw LB’s budget out of whack. It says nothing about the ability of LB to service new (additional) debt issues to fix the streets and infrastructure. What it seems to say is “the last guys misled us, you appear to be being straight with us and have said a lot of the right words and added some controls, and eliminated some bogus non-tax revenue estimates, and raised taxes — sounds good!”

    If Moody’s had a real clue they would see that some of the non-tax revenue numbers are still pie in the sky.

    Stay tuned.

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