Moody's Investor Services Places Negative Outlook on City of New Rochelle Credit Rating

Time to read
4 minutes
Read so far

Moody's Investor Services Places Negative Outlook on City of New Rochelle Credit Rating

June 14, 2011 - 16:35

moodysdowngrade.jpgAs the City prepares to sell General Obligation bonds to finance the acquisition of the New Roc Garage from the New Rochelle Industrial Development Agency, Moody's has informed the City that while it's Aa3 bond rating will be affirmed but it will place a negative outlook on the City's credit rating. The City hopes to save $3 to $4 million of debt service savings over the next 11 years.

In order to sell bonds, the City needs a rating review by a major rating service. The transaction will be discussed in tonight's City Council meeting.

"While the City’s bonds are still judged to be of high quality", City Manager Chuck Strome stated in a memo to City Council members, "the negative outlook recognizes the City’s reduced level of financial flexibility following continual drawdowns on our fund balance."

Strome continued "Moody’s notes that the negative outlook can be removed upon the achievement of structurally balanced budgets resulting in positive financial operations and/or the implementation of new or additional revenue sources to improve our fund balance position. As a practical consequence, the negative outlook connotation may result in slightly higher interest rates when this and future bond issues are sold. As is their practice, Moody’s will release this rating to the wire services in the next day or so."

Moody's downgraded New Rochelle's Bond Rating in December 2010. At the time New Rochelle Finance Commissioner release a statement which read, in part:

Moody’s has downgraded the City’s bond rating from Aa2 to Aa3. While acknowledging the City’s sizable tax base, wealth levels, and continued budget controls, Moody’s cites a weakened financial position resulting from declining sales tax and other revenues and the deterioration of our fund balance over the past three years. Moody’s has revised the ratings of 17 municipalities in New York State since the re-calibrated rates were established. Fifteen of those ratings were downgraded including the Village of Harrison (downgraded from Aa2 to Aa3), the Village of Tuckahoe (downgraded from A1 to A2) and Monroe County (downgraded from A2 to A3). The City’s new rating of Aa3 is still a relatively strong rating and is considered by Moody’s to be “of high quality and subject to very low credit risk”. Comparatively, this rating is lower than White Plains, equal to Mount Vernon and stronger than Yonkers. The impact of this rating change will mean slightly higher interest rates on future debt obligations when the City goes to market

Moody's ratings for Long-term obligation ratings

Investment grade

Aaa: Moody judges obligations rated Aaa to be the highest quality, with the "smallest degree of risk".

Aa1, Aa2, Aa3: Moody judges obligations rated Aa to be high quality, with "very low credit risk", but "their susceptibility to long-term risks appears somewhat greater".

A1, A2, A3: Moody judges obligations rated A as "upper-medium grade", subject to "low credit risk", but that have elements "present that suggest a susceptibility to impairment over the long term".

Baa1, Baa2, Baa3: Moody judges obligations rated Baa to be "moderate credit risk". They are considered medium-grade and as such "protective elements may be lacking or may be characteristically unreliable".

Speculative grade (Also known as High Yield or 'Junk')

Ba1, Ba2, Ba3: Moody judges obligations rated Ba to have "questionable credit quality."
B1, B2, B3: Moody judges obligations rated B as speculative and "subject to high credit risk", and have "generally poor credit quality."
Caa1, Caa2, Caa3: Moody judges obligations rated Caa as of "poor standing and are subject to very high credit risk", and have "extremely poor credit quality. Such banks may be in default..."
Ca: Moody judges obligations rated Ca as "highly speculative"[7] and are "usually in default on their deposit obligations".
C: Moody judges obligations rated C as "the lowest rated class of bonds and are typically in default," and "potential recovery values are low".


WR: Withdrawn Rating

NR: Not Rated

P: Provisional

There are 7 Comments

Moody's has confirmed that New Rochelle is entering a state of financial uncertainty. This is due to council raiding the fund balance over the last three years as cited in the finance commissioner’s communication. New Rochelle is hanging by thread, dangling over financial collapse because they continually use one-time infusions to balance their budgets and shore up their miniscule fund balance. This is further evidence that New Rochelle needs change. The democrats have controlled council for 20-years and must be held accountable for their failed policies. Tax-abated development has failed to produce people with disposable income spending their disposable dollars in New Rochelle. The number of school children forecast in studies done by democratic campaign donors has produced twice the estimation burdening taxpayers to the tune of an additional $2 million in 2011.

While service levels of police, fire and sanitation are at historic lows, New Rochelle continues its failed practice of enticing additional residents to reside in an already overpopulated and increasingly dangerous downtown while the Avalon’s demand 1,000 calls for service while paying a tiny portion of property taxes and ZERO school taxes!

Last night Mayor Bramson and company put their spin on Moody’s negative outlook but the reality is that New Rochelle used $4.5 million in one-time revenue last year to balance their budget which will not be available this year. At last year’s statistics, $4.5 million equates to a 9% property tax increase without contractual, retirement and health insurance increases.

The campaign season has begun. Ask these questions of the current council majority;
How do you intend to plug the $4.5 million shortfall in the 2012 budget?

They will raise taxes only after the election though. Noam will order the city mgr. not to release any information about the budget until after the election and then all the tax payers will be screwed. This city is headed down the wrong road so i say tell NOAM and his buddies on council to hit the high road. Vote them all out in 2011

The City Charter was manipulated by politicians when written. The charter requires the city manager to release the budget on the second Tuesday in November ensuring that the budget is released a week after election day.

We are tired of all the crap Mr. Mayor has done to this town. We want him out!

[this post was edited to replace ALL CAPS with lower case letters per Talk of the Sound policy; please refrain from the use of APP CAPS. Thanks]

That' what they want us to believe, while the New ROchelle Iluminati celebrate their bad decisions for this down in the "City Wall" and give each other parties so they can collect their local paper photos for the family album. Vote them out in 2011! This town has the highest taxes of this nation! Where is dah money Mr. Mayor?

Show us the money. Bigger cities can do better than this! To much blah blah blah and nothing gets done.