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Moody’s Upgrades OB-EN Bond Rating To Aa1; Utility Will Lower Tax Burden

Oyster Bay-East Norwich School District making the effort for greater efficiency

When Mr. Van Cott assumed the position of assistant superintendent for finance and operations for the Oyster Bay-East Norwich School District, the 2007-08 bond had already been approved and the money had been borrowed from the bank. It came on the heels of the adoption of the Energy Performance Contract.

In looking over the paperwork, Mr. Van Cott noticed that the district’s bond rating at the time was “Aa3.” Mr. Van Cott requested a conference call with OB-EN assistant business official, Elisa Pellati and Moody’s.  Moody’s is a company that employs a bond rating scale developed more than 100 years ago by John Moody and is the industry standard for rating the viability of financial systems based on risk.

Mr. Van Cott asked Moody’s to raise our rating. He based this request on looking at the ratings of neighboring districts and where we stood in relation to them.

Moody’s looked at the district’s financial statements and reserves. They also took into account the way the board of education conducts the annual budget process by gathering community input and adhering to strategies and techniques recommended by the NYS comptroller’s office.

The benefit of following this type of budget practice is realized with a positive year-end fund balance that can be used to fund reserves. When you fund reserves, it means that you do not have to borrow money from the banks to finance capital projects which saves the district the expense of interest fees that would go to the banks.

Moody’s upgraded the district’s rating to Aa2. Moody’s did an in-house revamping of their scale which resulted in raising the OB-EN district rating again to Aa1. The only rating that is better is Aaa, which is a system with no risk at all. All municipalities will carry some risk. Therefore OB-EN rating is as high as can be realistically achieved.

Another benefit is that when the district does need to borrow money, the Aa1 rating allows borrowing at a cheaper rate. That savings is reflected every year when borrowing for the Tax Anticipation Note (TAN).

Working closely with Superintendent of Schools Dr. Phyllis Harrington in conjunction with the board of education, Mr. Van Cott refinanced the existing debt at the new lower rates.  They have made energy efficient upgrades throughout the district. Also, the district is participating in cooperative bidding with other districts. In the past few years, transportation contracts have been reduced and labor contracts have been settled at historic lows while employee contributions to benefit programs have been increased.

Recently, material costs have been reduced by the installation of centralized printing stations at the schools.  Internet and phone costs have seen reductions as well.

Taxpayer Relief

Another effort to bring some relief to the local property owner is the culmination of a three-year project to get the boundaries of the district changed to include the waters of the Long Island Sound off the shores of Oyster Bay.

In 2008, a neighboring district approached the OB-EN Schools to enter into an agreement to have a survey done to gather information on the Iroquois Gas Pipeline. The pipeline runs from Ontario, Canada through the northeastern United States into western Connecticut. From Milford, CT, it enters the Long Island Sound where it is buried just below the seabed for a 36-mile extension that crosses the Sound to Northport and then travels west to Hunts Point in the Bronx.

Oyster Bay-East Norwich worked cooperatively with contiguous districts forming “The Unified School Districts of Nassau County” for the purpose of having this survey done.  The other districts include Great Neck, Manhasset, Port Washington, Roslyn, North Shore, Glen Cove, Locust Valley and Cold Spring Harbor.

The goal for this project was to find out if the boundaries for the school district could be extended to include the waters of the Long Island Sound halfway to Connecticut. If that were so, the Iroquois Gas Pipeline could be included on the local tax roles. The amount the district would receive from taxes would be the same. However, the Iroquois Gas Pipeline would now share in funding the total school tax bill, resulting in less of a burden on the local property owner.  

[FYI: The school tax levy is divided into four classes which are assigned a percentage of payment by the New York State Office of Real Property Tax Services and the Nassau County Assessor and the Legislature: Class I - residential, Class II - apartments and condos, Class III - utilities and Class IV - commercial. The assessors office sends all the school districts the percentages (adjusted base proportions) that each class will pay of the total tax levy that is paid to the county, after they send out the tax bills in October.]

As per the attorneys (as of 12/2011) the pipeline will most likely be reclassified as commercial property which is Class IV (rather than Utilities, Class III).

The survey was commissioned and performed by Seavision Underwater Solutions of Rhode Island who found that the districts did have the right to include the pipeline as a Class IV commercial property. Oyster Bay-East Norwich could claim 16.5 percent of the pipeline in the Sound.  

There was a one-time cost incurred in having the survey done, but now and every year hence there will be a permanent benefit to the local homeowner taxpayer in Oyster Bay-East Norwich.  

The only person who can legally change a school’s boundaries is the BOCES superintendent because he acts as an arm of the New York State Education Department. After receiving all the information gathered in the survey, the BOCES superintendent ruled in favor of the boundary change and now the Oyster Bay-East Norwich School District officially extends into the Long Island Sound halfway to Connecticut.  

Now that it is official, the pipeline will have to be re-assessed.  Until that is done, the savings to the taxpayer cannot be specifically quantified. This stands as another example of how OB-EN School District administration, with the support of the board of education, is doing everything it can to find relief for the local property taxpayer.