Moody’s Investors Service has upgraded the credit rating on the Village of Freeport’s general obligation limited-tax bonds to Aa3 from A1, the rating agency announced earlier this month. The new rating represents a continuation of an upward trend in the village’s creditworthiness over the past dozen years.
Mayor Robert Kennedy made the announcement on Tuesday, citing the upgrade’s positive reflection on village officials’ continuing efforts to improve Freeport’s finances.
“This upgrade of a double A will reflect our credit and will result in savings from municipal bond insurance, as well as attract new investors,” Kennedy said.
Moody’s pointed to the village’s improved finances over the past year as part of the rationale for the upgrade, and agency representatives said its decision was largely driven by the village’s efforts to find alternative sources of revenue.
Freeport’s credit strengths include its favorable location, a substantial tax base and a trend of positive financial operations, lead analyst Douglas Goldmacher wrote in the full ratings report. Further, Joe Mielenhausen, a representative of Moody’s, said that the new rating is the fourth-highest that can be issued to a municipality, and places Freeport two grades higher than Nassau County.
Kennedy also said that village reserves have increased from $1.5 million to $15 million, village debt has dropped from $145 million to $95 million, and the tax base has stabilized. The boost in reserves represents an increase of 361 percent since fiscal year 2013.
Kennedy also said that the village has made immense efforts to reduce spending and expand economic development, and as a result, taxes have not increased for the last six consecutive years.
The Moody’s report recognizes the village’s financial accomplishments and asserts that “finances will remain healthy in the near- to medium-term as management continues to budget conservatively and actively seeks new revenue streams.”
Goldmacher was especially impressed with the village’s ability to build reserves and address tax certiorari claims while holding the line on taxes. “Although property taxes are the largest source of revenue . . . they are not responsible for the financial improvement,” he wrote. “Since 2013, revenues are up 4.1 percent, while property taxes are only up 0.5 percent.”
Despite Freeport’s struggles with widespread tax certiorari claims that have reduced valuations and pressured the village’s finances, Freeport has had some success in reaching settlements faster and in reducing the financial and property value hit of appeals, Goldmacher wrote.
The report also highlighted that despite a sharp decline in the tax base from 2012 to 2015, it has rebounded in the past four years. Although the village’s tax base remains 14.7 percent off its pre-recession peak, it has a five-year compound annual growth rate of 2.3 percent.
Factors that can lead to a rating upgrade include a material increase in residents’ wealth and income, and an expanded tax base. Factors that can lead to a downgrade include a decline in residents’ wealth or income and a decline in the village’s reserves or liquidity.