Islip Town Receives High Bond Ratings

Islip Town has again received high bond ratings from the two leading investment firms, which provides the town a lower interest rate on any borrowing in make incur. 

Town officials recently reported that Standard & Poor's rated the township "AAA," its highest rating; while Moody's rated it Aa1, its second highest rating. 

A bond credit rating is a form of a credit rating, assessing the credit worthiness of a corporation or the institution's debt issues, which makes this ranking important, said Joseph Ludwig, Town of Islip comptroller.

The credit rating is a financial indicator to potential investors, banks, or lenders of the security of the debt or loan given. Therefore, the better the bond rating, the lower the borrowing costs.

"When a bank sets the interest rate for a loan given to an institution, such as the Town of Islip, one of the major factors they consider in setting that interest rate is the bond rating," Ludwig said, "An excellent bond rating indicates to the lender that there is a very low chance of the borrower defaulting on the loan."

In developing a bond rating, various fiscal factors such as business data, foreclosures and Town fiscal policies among other things, are factored into a rating agency's determination, he added.

Moody's report cites that "a conservative approach to budgeting revenues, as well as prudent control of operating expenditures, has generated a trend of favorable operating results."  The report also notes, "Moody's anticipates the Town's debt position will remain manageable."

Debt service costs, or interest costs, can potentially have an enormous effect on the Town of Islip, which is why maintaining a high bond rating is so vital, town officials said. By way of example, if a municipality's bond rating fell to a low level, it could see interest costs double or even triple.  While actual figures on the money saved by maintaining a high bond rating varies with financial markets, Town of Islip is able to save hundreds of thousands of dollars a year by maintaining a strong bond rating, said Phil Nolan, Islip Town Supervisor.

He said the town manages to maintain strong bond ratings by taking certain steps. "The numerous cost-cutting measures I have taken, such as slashing overtime, reducing worker's comp expenses, and making our workforce more efficient, have enabled us to budget conservatively while maintaining one of the lowest town tax rates on Long Island," he said. "Our management team took proactive steps in the face of a worsening economy, which left us in a better position to weather the storm."

As of August 2009 the town shared the distinction of having the highest bond ratings on Long Island with the Town of Huntington. "Since our high rating has been reaffirmed in 2010, we can say that we are either the highest on Long Island, or one of the highest," Ludwig said.

Councilwoman Trish Bergin Weichbrodt emphasized the importance of this high rating, but said the town has ranked well for the last several years. "I'm pleased to see that once again the town has received a 'AAA,'" she said. "Islip has received a "AAA" from Standard & Poor's since as far back as 2002, or possibly even before that."