Declining flexibility lands Westchester County a negative outlook
Westchester County, New York, took an outlook hit because of its decreased financial flexibility.
Moody’s Investors Service revised the outlook to negative on its Aa1 rating of Westchester County Thursday, citing the large New York suburban county’s fiscal challenges during the current fiscal year. The county is in need of a more structurally balanced budget in 2019 with reserves brought back to historic levels, according to Moody’s analyst Robert Weber.
“The negative outlook reflects the continued deterioration of the financial position resulting from large one-time expenses over the past two years and the need for incremental recurring revenues to structurally balance financial operations,” said Weber in his report. “The county expects financial flexibility to continue to decline through the end of 2018 given the use of reserves to settle union contracts.”
Moody's affirmed its Aa1 issuer rating, Aa1 general obligation limited tax rating and its Aa2 rating for lease-backed debt.
Weber noted that Westchester’s fiscal conditions are likely to improve in the near-term because of the county’s “strong management” and the fact that all union contracts are settled with retroactive payments to be accounted for by Dec. 31, 2018. He said the 2017 fiscal year “ended much worse than anticipated” due largely to budgeting $15 million in anticipation of privatizing of Westchester County Airport, which was not approved by county lawmakers. The county finished 2017 with a decline in reserves of roughly $32 million, according to Moody's.
“This rating is certainly no surprise,” said Westchester County Executive George Latimer, a Democrat who defeated two-term Republican incumbent Rob Astorino last year with 57% of the vote. “We have known for some time now that the county is in serious financial stress. We are taking steps every day to improve our footing, but the road ahead will be long.”
The Moody’s revision occurred close to a year after S&P Global Ratings also changed its Westchester outlook to negative from stable because of failure to enact more permanent revenue measures. S&P and Fitch Ratings both rate Westchester one notch higher than Moody’s at AAA.
Weber said that Westchester’s finances should get a boost from more conservative budgeting and revenue enhancements projected for the 2019 fiscal year thanks in part to better-than-expected sales tax collections. The county, with a population estimated at 980,244 in 2017, has $1.1 billion in long-term general obligation debt, according to Moody’s.
“The county has tough times ahead, and we have to make hard decisions to right the ship,” said Latimer. “I hope to have the County’s triple-A bond rating return before I leave office.”