Kingston has ‘strong’ debt profile, adviser says

The city is in “fine shape” regarding its debt, according to a financial adviser.

Noah Nadelson, of Munistat Services Inc., spoke the Common Council during an online caucus Monday about the city’s debt profile and the possibility of creating a multiyear capital improvement plan. He said the plan would just be a list of projects on the city’s horizon that would allow lawmakers to make informed decisions as they move forward. There would be no commitments to fund anything in the plan, Nadelson said.

“It’s an inventory of the needs going forward, and that will help us prioritize,” he said.

Nadelson also told council members that, based on key metrics looked at by bond rating agencies, Kingston has a “strong” debt profile. He said debt profiles can be rated as strong, adequate or weak, so the city is in fine shape.

City Comptroller John Tuey said Munistat Services has worked with Kingston for a number of years and handles things like he city’s annual statutory filings as part of its debt issuance. He said Nadelson is the person he consults about all of the city’s borrowing.

Nadelson said the debt profile is a snapshot of the city’s current outstanding debt and is the first step toward creating a comprehensive, multiyear capital improvement plan. He said funding

for certain projects might require the city to issue more debt because cities typically do not have all the money they need to finance larger projects. Borrowing allows them to spread the cost out over the life of the asset being purchased, such as infrastructure work, he said.

Debt only makes up about 10% of a city’s bond rating, and debt service makes up less than 10% of Kingston’s general fund operating budget, Nadelson said. He noted, though, that there are metrics published by Standard & Poor’s that provide a guideline for debt issuance.

According to those metrics, debt as a portion of a municipality’s budgeted revenues should be in the range of 30% to 60%, Nadelson said. He said Kingston, at the end of 2019, was at 43.4%.

“This is a positive,” Nadelson said. “This is the type of stuff we tell the rating agencies.”

Nadelson said the metrics also call for a municipality’s debt service as a portion of its expenditures to be in the range of 8% to 15%. He said Kingston was at 4.9%.

“There was a time when the city used to have to finance or borrow for cash-flow purposes,” and the city also had to amortize its state pension contributions at one time, Nadelson said. Both of those things are signs of fiscal stress, and neither applies to Kingston now, he said.

He also noted that in spite of rising costs for capital improvements, the city’s debt has remained relatively stable.