The credit rating agency Standard & Poor’s bumped Southampton Town’s credit rating up a notch this week, just as the town begins to embark on one of the largest bond measures in its history.
The S&P raised the town’s credit rating from AA to AA+, its second-highest rating, after town officials made a pitch to the company last month for a better rating. At the same time, the nation’s other major rating agency, Moody’s, again affirmed its own Aa1 rating for the town, also that company’s second-highest rating.
“This ratings upgrade by S&P and the Aa1 rating affirmation from Moody’s underscores the merit of the financial policies and procedures implemented over the past three years, and the now-healthy fiscal position of the town.” Town Supervisor Anna Throne-Holst said in a statement on Tuesday.
Both agencies had downgraded the town’s credit in 2009 and again in 2010 after towering multimillion-dollar deficits were discovered amid years of tangled accounting and sloppy bookkeeping. Starting in 2007, though, the town began righting the ship, and last year Moody’s restored the town’s coveted rating. Town officials, touting robust budget surpluses and deep spending cuts, had even lobbied the agency for its highest ratting, Aaa.
With interest rates on the rise as the national economy improves, the rating improvement could help lower the interest rate the town will get when it issues bonds in the next several months to fund the approximately $25 million beach nourishment project along the oceanfront of Water Mill, Bridgehampton and Sagaponack.
The bonds will be paid back with taxes levied on oceanfront homeowners along the 6-mile stretch of beach that will be rebuilt, but lower interest rates could mean more money to expand the project’s scope. Ms. Throne-Holst said she is confident the town will get a very favorable rate even though rates have generally increased since the town did its capital projects borrowing in the spring—at that time, it received the lowest interest rates it ever has for loans, just under 2 percent.
“This is a very attractive borrowing—it’s large, it’s extremely secure and it’s relative short-term,” she said of the 10-year bonds the town will begin issuing later this month for the beach nourishment project. “Our last borrowing was under 2 percent, the lowest we’ve borrowed at. Rates have gone up, and we want as good a rating as possible for this issuance.”