Reserve boost lands Lockport, N.Y., an upgrade
Lockport, New York, was raised two notches to A3 by Moody's Investors Service.
The rating revival comes almost five years after severe cash flow problems drove the Niagara County seat to the verge of junk.
Moody’s cited enhanced budget reserves for the action, which affects the issuer rating and general obligation bonds of the 20,700-population community.
Moody's had cut Lockport to the lowest investment grade rating of Baa3 in August 2014 amid a liquidity crisis that forced the city to issue deficit financing bonds to keep operations afloat. The city in 2014 sold $4.6 million of deficit finance bonds that eliminated fund balance shortfalls it had accrued through 2013.
“The upgrade to A3 reflects the city's improved financial position and return to structural balance as a result of various budgetary adjustments,” Moody’s analyst Christopher Yared wrote Wednesday. “The city’s finances should continue to improve as management focuses on increasing reserve levels and continuing to generate annual operating surpluses.”
Yared noted that Lockport achieved a $1.2 million surplus in operating funds for the 2017 fiscal year that brought its available fund balance up to $4.7 million. The city’s 2018 surplus was at around $600,000, according to unaudited results, after the budget increased by 2.3%, or $540,000. The city is forecasting lower sales tax revenue for its 2019 budget that rose 1.2% after discovering last year that it will need to return around $75,000 a year over the next 10 years to Niagara County due to several local businesses improperly recording sales tax receipts.
The city is in the midst of a legal challenge from its firefighters who are fighting staffing cuts made from a restructuring. Losing the challenge would result in Lockport potentially having to increase its firefighter budget by around $1 million, which Yared said would likely funded through a a combination of revenue enhancements and expenditure cuts.
Lockport had $12.6 million in direct debt outstanding as of Dec. 31, 2017, according to Moody’s.