YONKERS, NY — May 13, 2014 — Yonkers Mayor Mike Spano today announced that Moody’s Investors Service has upgraded its rating of City of Yonkers’ general obligation bonds to ‘A3,’ with a stable outlook, the highest rating since 1975, and an upgrade from the city’s previous ‘Baa1’ rating with an uncertain outlook. According to Moody’s, the upgrade to A3 factors the city’s improved financial management, including new legislation giving city management greater control over the Yonkers Board of Education (YBoE) finances.
“Getting this ‘A’ rating is a huge achievement in light of the recent overstatement of revenues by the Board of Education,” said Mayor Spano. “What it means is that we have an honest and workable plan to deal with that shortfall, and that as long as we stick to that plan the City’s financial future is strong.”
“This higher rating is important for every single taxpayer because it means lower interest costs on bonds,” Mayor Spano continued. “That’s less money going to bondholders and more money going to hold taxes down and provide essential services.”
“Working together with our Governor and state delegation, we have worked out a financial plan that Moody’s has deemed secure and responsible.”
Moody’s said the upgrade of Yonkers’ bond rating is a reaffirmation of the city’s large tax base that benefits from proximity to New York City, improved financial management over the past two years and the Fiscal Agent Act which provides additional security for bondholders to ensure debt will be paid on a timely basis. The rating also factors a financial position that is likely to remain slim, a manageable debt profile, and a sizable tax base that has experienced significant declines over the past five years, but is expected to benefit from planned development over the long term.
The stable outlook reflects Moody’s expectation that reserves will remain satisfactory given strong management and the city’s new managerial control of BOE operations, and despite the recent announcement that the BOE will end fiscal 2014 with a large negative reserve position.
Moody’s report stated that, “Our belief that the management will continue to offset challenges with sound financial management and conservative budgeting. The issuance of deficit reduction bonds will help significantly with the BOE’s liquidity issues but city management must bring the YBoE’s budget into balance. Failure to do so will likely result in negative rating pressure.”
Moody’s expects the deficit bonds to be issued and failure to do so will generate negative credit pressure, thus potentially jeopardizing the new higher rating. “It’s essential that we adopt the safeguards agreed to with the State as part of the deficit reduction plan,” said Mayor Spano. “Anything less runs the risk of putting us back on the path to fiscal decline.”
Mayor Spano added, “Given the Board of Education’s recent financial overstatement, and the City’s negotiations with the state to secure a reasonable financial resolution in rectifying its budget deficit, it is critical, now more than ever, that our Yonkers City Council supports the deficit finance resolution. Failure to do so will not only jeopardize our bond rating, but will have a direct financial impact on our taxpayers.”
Finance Commissioner John Liszewski said, “This A3 bond rating from Moody’s illustrates that under Mayor Spano’s leadership, we are not only moving Yonkers in the right direction and implementing sound financial policies, but creating conditions that will grow our economy and school district.”
Moody’s also noted several financial challenges facing Yonkers, including the City’s limited financial flexibility that will be further stressed by recent Board of Education deficits and the collective bargaining unit contracts that remain unsettled.
“The City has made a lot of progress over the last two years and our financial outlook continues to improve every day, but we’re not out of the woods yet,” said Mayor Spano.“The financial burdens that threaten New York’s Big Four Cities are real, especially those placed by our dependent school districts and increasingly dependent populations. I look forward to continually working with our city and state representatives and local union leaders to achieve a stronger and more financially secure Yonkers.”
This is the second bond rating upgrade this year for Yonkers since Mayor Spano took office in 2012. Standard & Poor’s recently upgraded its rating of the city’s general obligation bonds to ‘A+’, an upgrade of three notches from the City’s previous ‘BBB+’ rating.
SOURCE: Christina Gilmartin, Communications Director, Office of the Mayor