After meeting to discuss options on Feb. 19, Valley Stream village officials have created a plan to shore up the village’s credit rating after Moody’s Investors Service downgraded it on Feb. 15 to Ba1, in the junk category.
Village officials plan to freeze hiring, and dedicate a line item in future budgets to replenish Valley Stream’s cash reserves. Barring emergencies, they will also hold off on borrowing to avoid paying increased interest rates.
Additionally, officials said they anticipate increases in revenue and savings when construction of the village’s waste-transfer station is completed in roughly three months, as well as by other means, including increasing metered commuter parking on Sunrise Highway.
The measures are intended to shield residents from the negative effects of the downgrade, which will make it more expensive for the village to borrow money until Moody’s increases its rating.
Residents, Mayor Ed Fare said, “are not going to feel the higher bond rating because we’re not going to bond. We have no intention to bond until we get the bond rating higher.”
In a scathing six-page downgrade report, Moody’s analyst Douglas Gold-macher cited years of structurally unbalanced budgets in which expenses did not match revenues, leading Valley Stream to dip into reserves or raise taxes to make up for shortfalls, while eroding reserves in the process.
The two chief drivers of the declines, according to Goldmacher, have been a large number of property-tax certiorari claims and increases in employee benefit expenses, neither of which were accurately budgeted for. But the former, at least, may now be under control.
According to Village Treasurer Mike Fox, Valley Stream anticipates fewer successful property-tax assessment challenges going forward, as a 2012 reassessment of all village commercial properties valued at over $1 million takes effect, and as challenges dating to before the reassessment cycle out of the courts. Fox expressed disappointment that the Moody’s report did not acknowledge the downward trend in successful tax challenges in its analysis.
“I felt it was a little unfair that they didn’t want to recognize the trends of this year,” Fox said of the unaudited 2018 financials, which show a marked reduction in successful tax challenges.
Fare said that additional savings, as well as revenue, would come from the village’s waste-transfer station when it is completed. Currently, the village pays about $87 per ton of solid waste, he said, but expects to pay $75 per ton to Jamaica Ash — the company the village contracts with to dispose of its garbage — when the project is finished. The village currently collects about 15,000 tons of solid waste per year, and Fox estimated that the savings on the low end would be around $160,000.
The village also plans to allow neighboring communities to pay Valley Stream for use of the transfer station for their solid waste, creating another revenue stream, the amount of which is to be negotiated.
More revenue will also come from the planned placement of parking meters on the north side of Sunrise Highway, Fare said, from the Lynbrook border to Central Avenue, pending state approval. The additional spaces will also provide more commuter parking.
What went wrong?
Fare explained that the previous village administration may have been overzealous in its desire to save, leaving certain big-ticket items unfinished as it accumulated roughly $11 million in cash reserves.
“When I was in the Cahill administration, we saved, saved, saved,” Fare said referring to the late Mayor Ed Cahill, who died in office in 2012.
Among the projects Fare undertook were bringing village facilities into compliance with the Americans with Disabilities Act, and repairing infrastructure and purchasing emergency vehicles.
“We finished all these nasty, nasty things we had to do,” Fare said. “The can was kicked down the road. We did it.”
Goldmacher also cited a 2016 debt servicing accounting error and an underestimation of employee benefits as contributing to further erosion of the village’s cash reserves, from which it has not yet recovered.
“Favorably,” his report added, “two-thirds of the way through fiscal 2019, the trends have been positive, and management is again calling for a return to surplus.”
For now, between its reserves and its sizable tax base, Goldmacher said that the village has enough money to continue normal operations for the foreseeable future, but warned that until the village returns its budgets to surplus and starts adding to its reserves, its spending is “not sustainable.”
Additionally, Valley Stream still retains an excellent credit rating with Standard & Poor’s, which offers financial analysis similar to Moody’s. Currently, Valley Stream has an AA rating, the second highest offered by the agency.
Village officials plan to introduce their 2019 fiscal-year budget to the public on April 8, and Deputy Mayor Vincent Grasso announced on social media that he would address residents’ concerns after the next village work session on March 4.
Fare said that although he was disappointed that the Moody’s report came before the village had more savings to show, he was optimistic that now that various large-scale projects are completed or nearing completion, the village will find the surpluses it needs.
“We’re going to end this year with a surplus,” he said, “because actions speak louder than words.”