Moody’s Investors Services announced yesterday that it has downgraded Suffern’s general obligation debt rating to Baa1, just three grades above junk status, The Journal News/lohud.com reports today. The rating dropped two notches, from A2, and it directly affects about $7.3 million of rated bonds, the company said.
Moody’s said the village’s outlook remains negative, meaning its precarious financial situation could prompt yet another downgrade.
The move was the second setback in less than a week for the village. Last Friday, state Comptroller Thomas DiNapoli designated Suffern as the most fiscally stressed of 482 villages in New York. Three other villages in New York are in significant financial distress. All are on Long Island.
Nearly all villages under fiscal stress have low fund balances and budget deficits, along with declining property values, above-average or growing child poverty rates and a shrinking employment base, according to the report.
“The double-notch downgrade to Baa1 reflects our expectation that the village will continue to experience significant financial stress over the medium term,” the Moody’s report said. “The negative outlook demonstrates our lack of confidence that the village’s finances will materially improve in the short term.”
The report cited the village’s ongoing struggles with its water and sewer funds, which led to a general fund deficit of $1.3 million and required annual financial support. Suffern has a low cash reserve balance and has struggled to pay its bills. Officials are reluctant to further raise taxes and water and sewer rates.
The village has very narrow liquidity and will soon lose its largest taxpayer, Novartis Pharmaceuticals Corp.
The Moody’s report said the village has some strengths, including a moderately sized tax base with above-average wealth levels and a below-average debt burden.