Growing revenue challenges coupled with a “very weak” economy triggered a two-notch debt rating downgrade for Elmira, N.Y. into junk territory.
S&P Global Ratings lowered the city’s long-term bond rating to BB-plus from BBB Friday citing continued budgetary obstacles. Elmira has been slashed five notches by S&P since 2015 from its previous A rating.
“The rating action reflects our view of the city's ongoing challenges to align revenue and expenditures to maintain structural balance,” said S&P credit analyst Nora Wittstruck. “We believe ongoing shortfalls will further compromise the city's flexibility and liquidity.”
Elmira’s 2016 fiscal year budget resulted in a $1.6 million operating deficit with general fund reserves of negative $3.8 million. A budget stabilization plan for 2018 that includes a proposed 17% tax levy hike along with required state legislation to collapse the Elmira Water Board into the city's operations contains “significant risks," according to Wittstruck.
Elmira city officials did not immediately respond for comment on thedowngrade. The city, with a population of 29,200 as of the 2010 U.S. Census, is near the Pennsylvania border.
Wittstruck noted that Elmira’s fiscal woes are compounded by its economic conditions with a limited tax base to support debt service. The city had a low $24,439 market value per capita for 2017, according to S&P. Its overall market value grew by 1% last year to $687.7 million.
"Despite the development underway that could lead to long-term modest economic growth, we believe the city's economy will remain challenged in the absence of improved wealth and income metrics,” said Wittstruck. “We consider Elmira's economy very weak.”
Moody’s Investors Service dropped Elmira’s long-term issuer and general obligation limited tax rating one notch on Feb. 9 to Ba3. Moody’s analyst Douglas Goldmacher said the city is facing deteriorating finances, rising debt, a limited tax base as well as low resident wealth and incomes.
The Federal Reserve Bank of New York noted in a report last October that Elmira had lost 500 private-sector jobs in the past year. The analysis said that Upstate New York has been slower than other regions in recovering from the Great Recession of 2008.
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Corrected February 27, 2018 at 4:17PM: An earlier version misstated the Feb. 9 rating from Moody's