Just four months after lowering the city’s bond rating from A+ to A, ratings agency Fitch lowered it again.
The new bond rating is A-. The downgrade comes just five days after another bond rating agency, Standard and Poor’s, lowered the city’s rating.
All three major bond rating agencies have lowered the city’s bond rating in the last four months. And Fitch has now done so twice.
A bond rating is an evaluation of the trustworthiness of buying city bonds. A lowered bond rating can raise the cost of borrowing money by making investors wary of trusting their money with the city.
The city has about $500 million in outstanding general obligation bonds, and plans to release $39 million more, according to Fitch’s report.
In its latest downgrade, Fitch cites New Haven’s continuing expansion of pension costs, high debt, Board of Ed budget overruns, and low cash reserves.
“The reset to A- is disappointing as the city has diligently worked to reduce costs by resetting pension and medical care costs for city employees, growing the city’s tax base and adopted a budget for fiscal year 2014 that included no one-time revenues,” said city Budget Director Joe Clerkin. “However, the action is understandable due to the city’s fund balance deterioration and, of course, is in line with the financial pressures currently being felt by many jurisdictions.
“As we move ahead, the City will continue to ensure that we enter into labor agreements that the taxpayers can afford, that are fair to employees and that are mindful of current market conditions while continuing to develop our sizeable education, research, bio and life science economy.”
I would like to see a mayoral debate dedicated solely to the issue of the city's long-term obligations, and what needs to be done now to avoid becoming like Detroit.