Standard & Poor's Ratings Services said it has placed its A-plus underlying rating and school issuer credit rating on Yonkers, N.Y.'s general obligation bonds on CreditWatch with negative implications.
The CreditWatch placement indicates that there is a one in two chance that Standard & Poor's could lower the rating on the city in the next 90 days.
"The CreditWatch reflects our view of Yonkers' recently disclosed budgetary gap in its education fund due to the board of education's overbudgeting state aid payments in fiscal years 2013 and 2014 by up to $55 million," said Standard & Poor's credit analyst Lindsay Wilhelm.
As Yonkers is one of New York State's big five city school districts -- or districts fiscally dependent on the city -- this budgeting error could potentially deplete the city's available reserves and diminish liquidity in fiscal years 2013 and 2014 if the city uses its reserves to offset the deficit. However, Yonkers is in discussions with the state regarding potential alternatives for closing the gap.
Within the next 90 days, the rating agency expects the city to be able to provide a course of action for resolving the budget gap, as well as its fiscal 2013 audit report, reflecting any impact on the its financial position as of June 30, 2013.
