The financial well-being of the Village of Mineola was the topic of a heated discussion between resident Scott Fairgrieve and Trustee Warren Brinker at the Sept. 23 Village of Mineola public meeting.

"The Village of Mineola has been indicating to the public that its bond rating has increased," said Fairgrieve, however his own personal research as well as conversations with Moody's Financial analysts have led him to feel differently.

Brinker on the other hand said that he stands by his statements that the village did experience an increase in their rating. He added that Mineola has a stronger bond rating than New York City or the State of New York and is in excellent financial condition.

The debate hinges on a recent change in policy of the Moody's Investors Service, one of the top three major Investor's Services that rank municipalities, and the resultant change in the rating they gave to Mineola.

To begin with, there is a major misconception about Moody's rating system. According to Jim Moyer, bond counsel for the Village of Mineola, "It is not a rating of the municipality. It is a rating of the bond issue, Moody's view of the municipality's ability to repay the debt on a timely basis."

First introduced by John Moody in 1909, the bond rating system for Public Finance was a series of letters much like those used on school report cards with the higher letters indicating better ratings.

For many years the ratings from most favorable rating to least favorable rating were: Aaa, Aa, A, B, Baa, Ba, Caa, Ca and C. The lower end representing rankings of default and bankruptcy.

In 1981 Moody's added the number one (1) as a modifier to its system. Then in 1982, Moody's began assigning the numerical modifiers two (2) and three (3) to corporate bonds. In October of 1996, Moody's began assigning those modifiers ratings for bond issues within health care, higher education and other not-for-profit sectors, and the new system was applied to state revolving funds by November.

The new system from most favorable rating to least favorable rating is: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, and C.

Several trends such as who was holding the debts, increasing credit risk and volatility in public finance affected the municipal bond marketplace and therefore Moody's made a change in its system in an effort to offer greater and more accurate ratings.

In May of 1951 a Mineola General Obligation Bond received a rating of "A," which was an increase in standing from the "Baa" rating it was given for a bond issue in January of 1938.

According to Moody's information an "A" is awarded when an entity, "possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future."

In 1994 Moody's published a report that explained specifically why Mineola was given a General Obligation Bond rating of "A." According to the report the village's reserves were narrow, but it was able to maintain balanced operations and though the income levels were below other Nassau County levels they were still above the norm.

Furthermore, there was a "sizable" business presence and the village's debt burden was "moderate" and mainly comprised of overlapping units.

Mineola's rating remained "A" until the change in the system. After the new system was implemented in the Fall of 1996, Mineola was given the rating of "A2" for a 1998 General Obligation Bond. It is at this point where Fairgrieve and Brinker differ in opinion.

Fairgrieve contends that this change is not an increase in bond rating but rather just a modification of what the rating has been since 1951. Therefore the current rating of "A2" is equal to and not an increase from the previous rating of "A."

"It was not an upgrade," said Fairgrieve, "It is a parallel move."

If it was an upgrade, added Fairgrieve, the rating would have been changed to an "A1."

Fairgrieve cited a note published by Moody's that states, "Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end on that generic rating category."

Fairgrieve concluded, "If I am wrong, I will say I am wrong."

Bond Counsel for the Village of Mineola Jim Moyer is one of the people who disagree with Fairgrieve's position. In a phone conversation held the Friday following the meeting he stated, "The bottom line is Mineola is in better shape financially than it was a few years ago. That is my professional opinion."

Moyer cited his involvement with a Mineola bond issue in 1989. At the time Moody's recognized some problem areas and raised some questions.

In 1994 a task force from the village fought with Moody's to keep Mineola's "A" rating. This action culminated in a Moody's inspired plan to address the concerns and finally a strengthened standing for Mineola at an "A" rating.

"The position we would take," said Village Attorney John Spellman, "is that the village's bond rating has been enhanced."