Nassau County, New York, economically defeased $97.79 million of bonds on Monday through the deposit of cash with an escrow agent.
The action will reduce its debt burden by $13.5 million in 2024 and by over $20 million in each year through 2029, totaling $115.9 million, according to the county.
The county said while the bonds aren’t legally defeased as defined under the New York State local finance law, by establishing the escrow fund with enough money to pay the debt service on the bonds, it will no longer need to budget for the debt service.
The defeasance is also not yield restricted, the county said, allowing it to fund the escrow with the purchase of state and local government series (SLGS) securities, thereby reducing the legally required amount needed to deposit into the escrow fund.
The defeased bonds include parts of the county’s Series 2016B, Series 2016C, Series 2017B and Series 2018B general improvement bonds, maturing from 2024 to 2029.
PFM Financial Advisors LLC served as financial advisor to the county and Orrick served as its counsel.
The defeasance was made possible because of a general fund operating surplus that surpassed $200 million in fiscal 2022, a surge that was led by strong sales tax collections.
The county said its strong financial position is a result of the solid fiscal management policies that have been put into place in recent years.
“Nassau County is breaking away from old practices that created budgetary instability,” said County Executive Bruce Blakeman. “Paying off this debt will ensure that our budget has structural balance so our taxpayers will not have to bear the burden of a tax increase in these inflationary times.”
Nassau County, a suburb of New York City, has a wealthy tax base and a population of around 1.4 million, but ran into financial difficulties in the late 1990s.
The Nassau Interim Finance Authority (NIFA) was created by the New York State Legislature in 2000 to help the county emerge from its financial and debt crisis. NIFA has the power to monitor and oversee county finances.
“The county’s financial position is the strongest it has been in decades,” Andrew Persich, Nassau’s budget director, told The Bond Buyer. “The Blakeman administration will continue to implement fiscally conservative budget policies.”
In April, Moody’s Investors Service raised the rating on the county’s issuer and limited tax GO bond ratings to Aa3 from A1. The outlook remained positive.
Also in April, Fitch Ratings raised the ratings on the county’s outstanding GOs and its issuer default rating to A-plus from A. The rating outlook is positive.
In 2022, S&P Global Ratings raised the long-term and underlying rating on the county to AA-minus from A-plus. S&P assigns a stable outlook to the credit.