S&P Global Ratings has raised its rating on Utica, N.Y.'s general obligation bonds one notch to 'A-' from 'BBB+'. At the same time, S&P Global Ratings assigned its 'A-' rating to the city's 2017 public improvement bonds. The outlook is stable.
"We base the upgrade on Utica's continued improved financial performance including, building reserves, which has led to strong budgetary performance and a significant increase in the city's budgetary flexibility," said S&P Global Ratings credit analyst Lauren Freire. "In addition, the upgrade reflects management's continued focus on maintaining structural balance and reducing expenditures," Ms. Freire added.
The rating reflects our view of the following factors for the city:
• Very weak economy;
• Adequate management;
• Strong budgetary performance;
• Strong budgetary flexibility;
• Very strong liquidity;
• Very weak debt and contingent liability position; and
• Strong institutional framework score.
Management plans to use bond proceeds to purchase various pieces of equipment for the city.
Utica encompasses 17 square miles in central New York State in Oneida County. The city has moved away from manufacturing to a more services- and light manufacturing-oriented economy. Development projects are in various stages of either planning or construction. Many are in the commercial and industrial areas, although there are some residential projects as well. One is a multimodal transportation center in the downtown area. We expect these projects should gradually and modestly increase Utica's tax base. However, we believe the city will remain somewhat challenged to increase its base, given
that the overall population has declined 2.6% over the past seven years.
The stable outlook reflects our view of Utica's strong and sustained strong budgetary performance. The city's strong flexibility and very strong liquidity also support the rating. Despite the weakness in Utica's local economy, trends are lending some stability to the rating as local economy continues to expand. We do not expect to raise or lower the rating within the outlook's two-year horizon.
A possibility of a higher rating is contingent upon growth in the local economy, as well as growth in the city's available reserve position, or management formalizing certain budgetary practices while the city maintains current credit factors..
Should Utica experience operating deficits, requiring drawdowns on available reserves, and weakening fund balances and liquidity to a level no longer commensurate with those of similarly rated peers, we could lower the rating.
