New York Comptroller Thomas DiNapoli issued a stern warning about the fiscal condition of two dozen local governments on June 18, one that he said “should serve as a wakeup call.”
Yet many of the governments that appeared on
For example, Albany County ranked 11th on the comptroller’s rankings of 901 communities, and was defined by the comptroller as being in “moderate stress.”
The list ranked 901 communities in order of stress using a score based on 23 financial and environmental indicators.
Yet Standard & Poor’s has blessed Albany County’s general obligation debt with its AA rating, showing “very strong capacity to meet financial commitments,” according to the agency’s definition.
Moody’s Investors Service has given it a nearly as lofty Aa3 rating.
Franklin County was DiNapoli’s third most stressed government -- placing it in “severe stress” -- while S&P assigns a comfortably investment-grade A rating.
The government DiNapoli defined as being in the most fiscal stress, Monroe County, has respectable general obligation ratings of A3 from Moody’s and the equivalent A-minus from Fitch Ratings.
METHODOLOGY
DiNapoli’s office created
The system rates the state’s cities, towns, villages and counties using a scoring system to rate nine measures of financial and environmental stress, resulting in a final score on a scale of zero to 100%, with a higher number denoting more stress.
DiNapoli declared six governments scoring 65% or above to be in significant fiscal stress, six governments scoring 55% to just below 65% to be in moderate fiscal stress, and 12 others scoring 45% to just under 55% to be susceptible to fiscal stress.
“This is a measure of budget solvency rather than just examining debt,” Butry said.
Moody’s managing director Naomi Richman agreed. Moody’s bond ratings are about the likelihood of the repayment of debt, she said.
Moody’s looks at four broad categories in its analysis: economic strength, financial strength, management and governance, and debt profile, Moody’s assistant vice president Rob Weber said.
By comparison, DiNapoli’s method focuses on government finances and debt to create a percentage score that denotes how much stress the government is in.
The comptroller’s office also rated local governments on environmental stress based on factors like population change, poverty rates, property values, unemployment rates, and reliance on intergovernmental revenues. Of the 24 governments on the comptroller’s fiscal stress list, six are also classified as having environmental stress, the largest being Niagara Falls.
The comptroller’s environmental stress measures look at some of the factors that Moody’s looks at when it considers economic strength. Moody’s has followed many of the governments it rates for many years and based on this experience can make projections, Weber said.
Ultimately, the ratings agencies have a narrower focus on whether or not a government will be able to pay off its bonds, while the comptroller is trying to catch other forms of distress as well.
The Bond Buyer looked at two counties to see how the two measuring systems diverge.
ALBANY COUNTY
About 300,000 people live in Albany County, home of the state capital. As of December, Moody’s said it had $218 million in outstanding long-term bond debt.
DiNapoli gave the county poor ratings in three measures: a low general fund balance as a percent of the general fund; a poor ratio of cash investments divided by current liabilities; and frequent issuance of short-term debt.
The county received a 58% fiscally distressed score, putting it in the comptroller’s “moderate stress” category.
In giving the county’s general obligation debt an AA rating S&P did not just look at different factors, but also viewed some of the same factors differently.
S&P credit analyst Lindsay Wilhelm described Albany County’s general fund reserve level between 5% and 10% as a good position. In discussions with the county in December, the county told Wilhelm that it anticipated adding to its reserves in the coming year, she wrote.
The county also has a moderate debt burden with low debt service charges, Wilhelm wrote.
Wilhelm also pointed to topics that aren’t part of the comptroller’s fiscal stress score. The county has a strong economy, she wrote. About a sixth of its residents work in state government, a stable employer. Nanotechnology is a growing employer. The county has below-average unemployment and strong per-capita market value, Wilhelm wrote.
For its part, in rating the county Aa3 Moody’s agreed with DiNapoli that the county had a narrow general fund balance. Moody’s analyst Shannon McCue also pointed to a narrow liquidity position due to timing of intergovernmental payments.
On the plus side for the county, Moody’s also noted the county’s rapid technology sector growth and manageable debt burden at 4.1% of full valuation.
“The most significant impediment to our future financial stability continues to be the Albany County Nursing Home,” said Albany County executive Daniel McCoy.
The county is losing $1 million a month with the home, said the county’s director of communications, Mary Ropak. McCoy has made a proposal to address the home and its losses, but the county legislature has blocked it, she said.
The county went from a $6 million operating deficit to balanced budget in 2012, McCoy said.
MONROE COUNTY
Monroe County’s seat is Rochester; it has about 745,000 residents, and had $458 million in long-term general obligation debt in June 2012.
DiNapoli gave the county his lowest possible scores for assigned and unassigned fund balance ratio, total fund balance ratio, number of years with an operating deficit, cash investment as a percent of current liability, cash as a percent of monthly expenditures, and the number of years it has issued short-term debt. It also did poorly on a measure of short term debt issuance as a percent of general fund revenues.
The comptroller gave Monroe County an 82% fiscal stress score, New York’s worst.
The ratings agencies have not released a report on the county since June 2012.
Fitch’s most recent report cited the government’s dependence on one-time sources of income and its government’s commitment to not raise the property tax rate. As the comptroller did, Fitch said cash flow borrowing was a concern.
“The A-minus rating is well below Fitch’s average rating of ‘AA’ for unlimited tax general obligation debt across the country,” analyst Stephen Friday wrote.
Moody’s pointed to many of same factors noting, as DiNapoli did, that the county’s fund balance is narrow.
Monroe County is Moody’s second lowest ranked New York county, Weber said. Moody’s ranks Rockland even lower, and DiNapoli has not yet scored that county, Weber said.
The Monroe County executive did not get back to The Bond Buyer with a comment, but county legislator Paul Haney offered his thoughts.
The county government is in significant fiscal distress and its situation is getting worse, he said. The government’s net assets have plummeted from 2001 to 2012, Haney wrote.
However, he wrote, the county has a relatively low debt burden, and all its bonds are backed by the full faith and credit of the county. If for some reason the county didn’t pay its debt, bondholders could get the state courts to require the county to make tax increases and other measures.
“We may reach the point of being unable to pay our vendors or employees, but our ability to pay our bonded debt will never be in question,” Haney wrote.
