Awaiting FEMA funds, L.B. to borrow $38M
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Schnirman said that the city’s Moody’s rating has not been upgraded since December 2011, when the agency reduced it from A1 to Baa3, the lowest investment grade, citing the city’s then $48.3 million in general-obligation debt and the “lack of a structural balance due to declining mortgage tax revenue and increasing expenditures.” Since then, however, Moody’s has removed the threat of a further downgrade, and given the city many positive credit reports.
“Moody’s expects the city’s below-average direct debt burden will remain manageable given limited near-term borrowing plans,” Schnirman read from a statement by Moody’s.
But some residents expressed concern that FEMA would not reimburse all of what the city plans to borrow, and it would fall on them to make up the difference. “What if FEMA doesn’t pay?” asked resident Doug O’Grady. “If this goes into default in the next year, who’s going to pay? Think about the guy who’s going to get hurt here; it’s the little guy.”
O’Grady said that the city can’t risk jeopardizing its credit rating again, and suggested that long-term borrowing would be safer. Schnirman disagreed, insisting that a short-term note was the safest option, and that it is a common practice, especially after storms. The school district recently issued a revenue anticipation note to pay for storm-related work, he pointed out, and the East Rockaway and Island Park school districts are taking similar action.
LaCarrubba explained that the city has been working with FEMA on every recovery project, and there is a lot of back-and-forth before decisions are made and costs are assigned. He said that for some projects, city officials are using the costs suggested by FEMA to avoid any problems down the road. LaCarrubba added that the city and FEMA don’t always agree on every project, but they do, he said, on all the work to be covered by the $38 million.
Schnirman noted that even if FEMA didn’t approve certain items, those decisions are appealable, and the city would fight them.
“This is absolutely well-thought through,” he said. “At the end of the day, what’s the alternative? The choice is, fix the city’s infrastructure, keep the city moving forward, or don’t.”