Standard & Poor's Ratings Services said it has lowered its rating on Saugerties, N.Y.'s general obligation bonds two notches to A-minus from A-plus.
The outlook is negative.
"The downgrade reflects our opinion of the town's deteriorated financial position, with negative general fund reserves at the close of fiscal 2011, and an additional deficit expected in fiscal 2012," said Standard & Poor's credit analyst Lindsay Wilhelm. The negative outlook reflects the town's weak fund balance position leaves it vulnerable to unanticipated budget variances.
The rating continues to reflect the town's: primarily residential and rural character with some industrial and commercial development; good income levels and extremely strong property values; expectations for financial improvement given a recent tax levy cap override and anticipated mitigation of expenditure pressures; ability to maintain liquidity to date without requiring interfund or external cash flow borrowing; and low debt burden given the use of state grants for ongoing capital projects.
The town's faith and credit GO pledge secures the bonds.
Saugerties' financial position has deteriorated over the past two years, resulting in a negative reserve position in the general fund. The town is taking steps to remedy the deficit, and will likely rebuild reserves over the next three years, assuming no unanticipated shortfalls.
The negative outlook reflects the town's vulnerable financial condition, which is likely to continue for at least the next two years as the safety net costs are phased out of the town's budget and tax levy. Saugerties' ability to stabilize its financial position in the current fiscal year, and begin rebuilding reserves over the next two years could lead to a revision of the outlook to stable or even raising the rating one notch. However, any unanticipated events that result in further general fund drawdowns could lead to a lowering of the rating.
