Good news, bad news for city

Moody’s down­grades rat­ing, one day af­ter S&P af­firms cur­rent rank

New Haven Register (New Haven, CT) - - FRONT PAGE - By Mark Zaret­sky

WEST HAVEN — Moody’s In­vestors Ser­vice, one of the two main agen­cies that rate the city’s credit, has down­graded West Haven’s rat­ing by one notch — its sec­ond down­grade in two years — and given it a neg­a­tive out­look.

But that came just one day af­ter Stan­dard & Poor’s af­firmed the city’s cur­rent rat­ing, gave it a sta­ble out­look and re­moved it from S&P’s “Cred­itWatch” list.

Mayor Ed O’Brien, who will hand the city’s reins to May­or­elect Nancy Rossi on Dec. 3, chose to em­brace the Stan­dard & Poor’s view, while his fi­nance di­rec­tor, Kevin McNabola, said the dif­fer­ent rat­ings trends re­flect dif­fer­ences in the two rat­ing agen­cies’ pri­or­i­ties.

“I think (the S&P rat­ing) re­flects what we’re do­ing here,” said O’Brien, point­ing out that “many towns were on Cred­itWatch” and “many of them got down­graded” by S&P.

“I think Moody’s is just a re­cal­i­bra­tion of what they’re do­ing in the state of Con­necti­cut,” O’Brien said. “Moody’s is do­ing rat­ing calls with many cities in CT be­cause of the state bud­get.”

Rossi said it wasn’t much of a shock to her to see Moody’s down­grade West Haven.

“Sadly, it’s not a big sur­prise,” she said. “The fi­nan­cial con­di­tion of the city is one of the things that I did run on. Once I get sworn in, we’re go­ing to ev­ery­thing we can to change the fi­nan­cial con­di­tion

of the city.”

The rat­ings came on Thurs­day and Fri­day, re­spec­tively.

McNabola said what Moody’s did in down­grad­ing West Haven is con­sis­tent with what it has done with other mu­nic­i­pal­i­ties that rely heav­ily on state aid. He pointed out Bridge­port and New Bri­tain also were down­graded by Moody’s.

He also pointed out that Stan­dard & Poor’s af­firmed Bridge­port’s cur­rently rat­ing and gave it a sta­ble out­look, just as it did with West Haven.

“Moody’s has put a heavy re­liance on gov­ern­men­tal fund­ing that the cities re­ceive that makes the cities vul­ner­a­ble to fu­ture state fis­cal chal­lenges,” McNabola said.

He pointed out that “over 40 per­cent of our rev­enues here in West Haven come from the state of Con­necti­cut,” which is a con­cern for Moody’s.

“I think S&P looks at is as, we’re def­i­nitely tak­ing the right steps to fix the long-term im­bal­ance,” McNabola said. “I think Moody’s is just a lit­tle bit more con­ser­va­tive ... and long term, and a lit­tle more fo­cused on the state.”

Rossi, who works as a cer­ti­fied pub­lic ac­coun­tant, said her con­cern is with the re­sults from the last fis­cal year, which ended June 30 and is just en­ter­ing the au­dit process.

“I’m re­ally con­cerned be­cause I don’t know what’s go­ing on for that year,” she said. “Now if we go and we deficit bond ... we’re go­ing to end up with a deficit bond and we’re go­ing to end up with a deficit for 2017” in ad­di­tion to that, Rossi said.

City trea­surer-elect Michael Last, co-chair­man of Rossi’s tran­si­tion team, also said the Moody’s down­grade was no sur­prise — and said the Rossi ad­min­is­tra­tion will re­spond just as soon as it takes of­fice.

“On day one there will be a hir­ing freeze, there will be a spend­ing freeze and we’ll have to take a look at the cur­rent year’s bud­get and make ad­just­ments to try to re­duce the deficit in the year go­ing for­ward,” Last said.

Moody’s down­graded West Haven’s gen­eral obli­ga­tion rat­ing to Baa3 from Baa2, and as­signed a Baa3 rat­ing to the city’s ex­pected $15.5 mil­lion in gen­eral obli­ga­tion bonds to fi­nance the deficit, as well as to $9.6 mil­lion in gen­eral obli­ga­tion bonds for other projects. At the same time, it re­vised West Haven’s out­look from sta­ble to neg­a­tive.

Ac­cord­ing to Moody’s, “The down­grade to Baa3 re­flects an in­crease in the city’s Gen­eral Fund deficit since the time of our last re­view. Although deficit fi­nanc­ing bonds will cure the ma­jor­ity of the deficit as of fis­cal year end 2016, the city in­curred an additional deficit in 2017 and re­mains chal­lenged to ef­fec­tively match re­cur­ring rev­enues with re­cur­ring ex­pen­di­tures.

“The rat­ing also re­flects neg­a­tive po­si­tions in funds out­side the Gen­eral Fund,” Moody’s wrote. “The rat­ing fur­ther in­cor­po­rates the city’s size­able tax base that will ben­e­fit from a sig­nif­i­cant pipe­line of lo­cal de­vel­op­ment, wealth and in­come in­di­ca­tors that av­er­age rel­a­tive to national aver­ages but be­low av­er­age for the state and an above av­er­age debt bur­den with fu­ture planned is­suance.”

The neg­a­tive out­look “re­flects the be­lief that the city will re­main chal­lenged to bal­ance oper­a­tions in the near term de­spite its ex­pected qual­i­fi­ca­tion for additional state over­sight from the re­cently es­tab­lished Mu­nic­i­pal Ac­count­abil­ity Re­view Board,” Moody’s wrote.

S&P Global Rat­ings, mean­while, af­firmed its BBB rat­ing on West Haven’s bonds “and re­moved the rat­ing from Credit-Watch with neg­a­tive im­pli­ca­tions, where it was placed on Sept. 28, 2017. At the same time, we as­signed our ‘BBB’ rat­ing to the city’s series 2017A and 2017B GO bonds. The out­look on all rat­ings is sta­ble.”

“Our rat­ing ac­tion re­flects the re­cent state bud­get en­act­ment and its im­pact on our view of the city’s bud­getary per­for­mance, cou­pled with the city’s con­tin­ued ef­forts to im­prove struc­tural align­ment of rev­enues and ex­pen­di­tures,” S&P wrote.

“We also an­tic­i­pate that as a re­sult of deficit fi­nanc­ing through the is­suance of the series 2017A bonds, the city’s re­serve po­si­tion will im­prove to near-zero lev­els at the end of fis­cal 2018,” S&P wrote. “While this would be a sub­stan­tial im­prove­ment from the neg­a­tive deficit po­si­tion of greater than 5 per­cent of ex­pen­di­tures for the past seven years, we note avail­able re­serves will re­main at lev­els we consider very weak.

“De­spite our ex­pec­ta­tion that re­serves will im­prove, we be­lieve the city has not yet shown the abil­ity to achieve and main­tain struc­tural bal­ance in or­der to sup­port re­serve growth and that the im­ple­men­ta­tion of cer­tain ini­tia­tives sup­port­ing struc­tural align­ment re­main un­cer­tain,” S&P said. “We be­lieve rev­enue and ex­pen­di­ture ad­just­ments are un­likely to sup­port a return to struc­tural bal­ance prior to fis­cal 2019 and po­ten­tially could be later if pro­jected prop­erty value growth is not achieved.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.