Standard & Poor's placed its BBB-plus general obligation debt of Niagara Falls, N.Y. on CreditWatch Negative Monday morning.
The city has presented cash flow analyses to S&P indicating the city will run out of cash in either July or September, assuming no other substantial developments and depending on which assumptions are used. The July date includes capital expenditures and the September date does not.
The city has debt service payments of $1.3 million in September, $1.3 million in November and $1.6 million in December.
In January, Moody's Investors Service said Niagara Falls had $66 million in outstanding debt.
The city says that some of its capital expenditures are discretionary. It is saying that it will fund only those projects that are contractually obligated, S&P credit analysts Hilary Sutton and Lindsay Wilhelm said.
Capital spending will be reimbursed 80% by the state and bond proceeds will cover the balance, Sutton and Wilhelm said.
Barring significant changes, they said they expect the city to run out of money between July and September.
The city and New York have a dispute with the Seneca Nation, which operates a tribal casino in Niagara Falls, that is currently in arbitration.
The city is hoping to receive $17.3 million from the Seneca Nation by midyear. The mayor of Niagara Falls expects the arbitration panel to decide by midyear.
"If the ruling is no found in favor of the state, or if it is delayed, we believe the city will be under considerable pressure to make its debt service payments," Sutton and Wilhelm write.
Should the casino money not appear in time, the city is considering an arrangement with the New York Power Authority. The city would receive a payment of $13.4 million from the authority in exchange for forgoing 44 years of annual payments. This could conceivably be done before this summer.
The GO debt is rated BBB by Fitch Ratings and Baa1 by Moody's. Fitch has the debt on Rating Watch Negative and Moody's has it on review for a downgrade.
Prior to today's action, S&P had a negative outlook on the debt.