The Town of Hempstead board of trustees authorized the issuance of $26.2 million in public improvement refunding serial bonds, town Supervisor Laura Gillen announced on Jan. 18.
Moody’s Investors Service assigned its Aa2 rating to the bonds with a positive outlook. The town maintains Aa2 issuer and GOLT (General Obligation Limited Tax) ratings.
The bonds were issued as a refinancing of 17 of the town’s 2010 Series A public improvement bonds. The refinancing will save the town an estimated $1.5 million in the next five years, according to Gillen. The refinancing will enable the town to lower the interest rate on the bonds to 1.7 percent from 4 percent.
“As chief executive and financial officer … it is my responsibility to protect the financial future of our residents,” Gillen said in a statement. “We seized this unique opportunity to save taxpayers money without hesitation.”
“The Aa2 issuer rating reflects a significantly improved financial position that will likely continue to improve as management works to replenish fund balance in compliance with the town’s fund balance policy,” Moody’s lead analyst Robert Weber wrote in his rating report. “Management notes that fiscal 2018 will likely end with a surplus of approximately $21 million,” slightly less than the $26.9 million Moody’s projected in its November review of the town’s finances.
“The rating also reflects the town’s large, highly diversified and wealthy [New York City] suburban tax base, with manageable debt and fixed costs,” Weber wrote. He cited the town board’s “ability to override the property tax cap and the town’s faith and credit pledge supporting debt service” as features supporting the rating and outlook.
“The positive outlook reflects conservative budget management, which includes budgeting for surplus operations,” Weber wrote. “We anticipate that over the next two years, the town will replenish its financial reserves to a level consistent with a higher rating.”
Factors that could lead to a rating upgrade included better-than-expected audited 2018 financial results; continued increases to reserves and liquidity in 2019; and future budgets that reflect the town’s current conservative management. Factors that could lead to a downgrade include a decline in reserves and liquidity in 2019; poorer-than-expected results in the town’s audited 2018 financials; and the use of reserves to balance future budgets, as the town did in 2017.
The town’s total outstanding debt was $333,079,999, as of Dec. 31. The current fund balance is $117,581,857. Debt service requirements on outstanding bonds are expected to total roughly $58,960,000 for fiscal 2019. The town has used less than 5 percent of its debt limit, according to regulatory disclosures appended to the town’s official statement accompanying the prospectus.