Debate Over S&P Report

Written by Katie Piacentini, Kpiacentini@antonnews.com Friday, 15 March 2013 00:00

The current Manorhaven administration is taking credit for an upgrading by Standard & Poor’s in the municipality’s financial rating, saying the credit-watch agency based its report, released in December, on the village’s most current accounting documents.

S&P in December upgraded the village’s outlook, from negative to stable, assigning the municipality an A Plus rating.

“This is a great accomplishment by the Mayor (Giovanna) Giunta and the board,” said village attorney Charles Casolaro. But former Manorhaven Trustee Jim Avena, in an advertisement placed in this week’s issue of the Port News, said that the upgrade actually reflects on the work of the previous administration, since S&P does not have enough lead time to review new and developing accounting procedures. The ad says that updated ratings are based on the previous fiscal year.

Avena was backed up by Standard & Poor’s. An S&P employee said the ratings are based on the previous fiscal year, and sent Port News a report showing that the recent rating upgrade was based on village finances from 2011, which was the last audited year. The employee also stated that S&P only reviews and reports on finances, and would never make political statements. Therefore, they would never issue a report stating that a rating update was based on the work of a specific administration.

The report states, “At the close of fiscal 2011, the last audited year, the village closed with a drawdown of $123,000, decreasing the general fund balance to $264,241, or 7.7 percent of operating expenditures, a level we consider good. The drawdown helped offset a decline in capital grants and registration fees. Major sources of revenues include property taxes, accounting for 77 percent, and state aid, 6 percent. While the village’s goal is to increase and maintain fund balance at approximately $500,000, officials expect only to maintain fund balance for several years given the recent recession and state’s property tax cap.”

A statement relating to 2012 was: “Unaudited fiscal 2012 results indicate an operating surplus of $372,154 due to conservative budgeting and an increase in the unreserved fund balance to $473,254, or what we view as strong 13.9 percent of operating expenditures.”

The one statement relating to the current financial picture was: “It is our understanding that the fiscal 2013 budget is balanced at $3.7 million without an appropriation and that management expects its reserve position to remain relatively unchanged.”

The report concludes, “The stable outlook reflects the village’s diverse residential community with good access to New York City. It also reflects our opinion of the village’s stabilized financial position even though we consider reserves to be low on a nominal basis. It is our expectation that the village will continue to balance in the budget to maintain a sound financial performance, including good to strong reserves on a percentage basis, in the next two years. Evidence of fiscal deficits or significant reductions in reserves could result in a downgrade.”

The S&P report was written before the village approved more than $600,000 in bonds, to fund clean-up efforts after Hurricane Sandy. The mayor and village board approved the bonds at an emergency board meeting on Jan. 17.

In the village’s Winter 2013 Newsletter, Trustee Dorit Zeevi-Farrington explained the decision that went into passing the bonds. She wrote, “While we anticipate reimbursement from FEMA, they have notified us and other villages that payment may take up to a year. The mayor and the board, in accordance with advice from our financial consultants, accountants, and our village attorney, have decided that in the issuance of a short-term bond anticipation note for $225,000 and a budget note for $485,000 will be the best way to meet our current obligations. The amount of this bond and note is for our debt incurred from Sandy plus interest and issuance fees. As a result of our recent upgraded credit rating by Standard & Poor’s to “A+,” as well as the low-interest environment, our interest on the loan is expected to be low. We will seek to repay these loans as soon as it is feasible and upon payment from FEMA.”

Mayor Giovanna Giunta responds to the S&P matter in a Letter to the Editor, printed on page 20 of this week’s issue of Port News.