Standard & Poor's Ratings Services said it revised its outlook to negative from stable and affirmed its BBB-plus long-term rating on the city of Utica, N.Y.'s general obligation debt.
"We revised the outlook to reflect our assessment of the city's recent reductions in reserve levels, diminished liquidity that has led to the recent issuance of revenue anticipation notes, and the ongoing structural imbalances that have led to the use of Water Trust Fund principal to bridge the gaps," said Standard & Poor's credit analyst Danielle Leonardis.
The rating reflects Standard & Poor's opinion of the city's: continued role as a regional employment center characterized by unemployment levels on par with the state and nation; overall area economy characterized by a continuing trend of declining population base, low income levels, and a stagnant tax base; recent evidence of some economic development activity within the borders of the city; financial position, with now declining reserves, that continues to face pressures to fund rising employee benefit costs and increasing pension contribution costs; use of the Water Trust Fund; established in 1996, now using both principal and interest for recurring operating and capital expenditures; and low debt burden with manageable capital needs.
"The city continues to face significant fiscal challenges, and despite recent layoffs in fiscal 2013, actions to date have not been sufficient to offset structural imbalances," said Leonardis.
Standard & Poor's expects that the city will continue to work toward improving reserve and liquidity levels and adopting structurally balanced budgets without the use of deteriorating reserves. If the city continues to draw down on already weakened reserves, Standard & Poor's would likely lower the rating.
Utica encompasses 17 square miles in central New York State. The city's full faith and credit GO pledge secures the bonds.