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City Bonds Take Another Hit
by Staff | Aug 8, 2013 3:17 pm
Posted to: City Hall
For the third time since April, a ratings agency has downgraded New Haven’s bonds.
Standard and Poor’s announced Thursday that it has lowered its rating of New Haven’s general obligation bonds from A- to BBB+.
The move completes a trifecta: All three agencies that rate the city’s debt have lowered New Haven’s rating in the past four months. In April, Fitch lowered the city from A+ to A. In June, Moody’s downgraded New Haven from A1 to A2. Standard and Poor’s is the first agency to knock New Haven down to the B range.
Like Fitch and Moody’s, Standard and Poor’s cited New Haven’s low cash reserves and high employment benefit liabilities as the reason for its downgrade.
New Haven last had a BBB+ rating in 2000, according to a release from city spokeswoman Anna Mariotti.
Standard and Poor’s rates New Haven’s outlook as “stable” and offers the following “financial strengths”: “Large and diverse tax base. Growing biotechnology industry. Sizeable economic development projects which are expected to result in even further expansion of the tax base.”
Mayor John DeStefano is “disappointed” by the rating, “as the city has been working diligently 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,” the release states.
“However, the rating is understandable as this is the second year the city has had a net operating loss,” the mayor says in the release. “In 2013, we incurred over a million in storm costs due to the blizzard and received $2.5 million less in state aid than anticipated.”
Tags: standard and poor's, bond rating, trifecta
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After 20 years King John is still passing the buck even as he walks thru the revolving exit door.
Who raised taxes 300% in his tenure and still has “low cash reserves”. King John that’s who.
Who signed the contracts that had the unsustainable “high employment benefit liabilities”? King John that’s who.
Watch out New Haven, King John 2.0, aka Toni Harp will also give her union buddies everything they want, even if it means bankruptcy.
Lies, Damn Lies Notes:
1. The mayor’s statement is completely false. It’s a lie. He nor his administration have been exerting much effort at all at reducing operating costs - there has been no hiring freeze; no overtime freeze; no travel ban. There has been no reduction in spending - the budget just passed by the BOR as proposed by the mayor, spends more, and borrows more.
2. The union pension and health reductions save a little but not hardly enough. Those contracts were a gift of goodies. We employ 5,000 people and we employ more cops and more firemen far in excess of cities our size - that’s over-employment by about 30%.
3. The city’s bond debt is extraordinarily large - and the deficit from this year and last were known for the entire budget year. They were built in structurally. The trio of bond agency downgrades follows previous downgrades starting years ago.
4. This downgrade will further erode the budget and cost taxpayers including renters a lot more money.
5. Mayoral candidates should be asked how they intend to deal with this since the current mayor doesn’t give a rip about it and never has. And neither has the BOR members.
Why isn’t this story in the main body of the NHI? This is the #1 long term problem for the city. If we continue to run deficits and have reduced ability to borrow, we quick start on the path of Detroit. Without money, there would be less cops, more crime problems, no jobs programs, and higher mil rates (chasing more people and businesses away) just to name a few problems.
Each mayoral candidate should be asked for specifics on how they would address this elephant in the room. New Haven does not have the option to print money like the feds. Someone has to get this under control.
Can the NHI reach out to each of the campaigns for a comment on this? This is a major issue for the City and anyone who wants to be mayor should have a plan to start dealing with this mess on day one.
It is concerning that we are getting downgraded while we are experiencing economic expansion. The city has recently seen many developments completed (360 State, Gateway, Smilow, Science Park, etc) and many more are underway (Downtown Crossing, Yale SOM, Coliseum site, etc) that will increase the tax base. Increasing tax base means our ratings should be improving not going down. The fact these agencies believe we are in worse shape now than we were before these developments started shows they don’t think our city is fiscally responsible. Our taxable base is increasing yet the rating agencies have less confidence in us indicates we have some spending issues, we are not living within our means.
I also would like to see a debate on this topic among mayoral candidates (if there hasn’t been one already).
Many of the projects you list don’t actually increase the tax base. If and when the newer projects get built, the tax base will indeed increase, but that will still be a few years down the road.
A Contrarian - The grand list has been growing at a healthy rate over the past few years. I was just throwing out a few development examples, there are many more. You’re right Gateway and SOM don’t increase the tax base directly but they are still positive economic drivers. There’s been a lot of economic growth in New Haven recently and there is a lot more in the pipeline, both of which a credit rating agency would take into consideration when rating a city. So to me, it’s a bit odd we are getting downgraded. My point was just that we need to be careful about borrowing and spending.
I’d like to be optimistic, but better to take a wait-and-see attitude. 360 State got hit with that enormous unexpected tax bill, but developers seem willing to go ahead with projects. But many things in the pipeline could easily be delayed for a good long while or even be canceled. The Great Recession set everything back five years plus whatever momentum would have been generated. And it would take only a few shortsighted, or mean-spirited, or simply stupid decisions to set New Haven back by 20 years. We’ll see what happens this fall, but “one can never underestimate the intelligence of the American voter. ”
This article serves as a rebuke to Henry’s flagship claim that moving Gateway downtown was an economic plus for the City. You simply can’t take large swaths of prime commercial downtown real estate (ala Gateway, Coop High School, Smilow, etc) and render it non-income producing property and expect long term city finances to prosper. And the Long Wharf Gateway sight sits idle and vacant and non-revenue producing. Throughout DeStefano’s tenure (including all the time Henry was the architect of Economic Development deals) New Haven thumbed it’s nose at the “highest and best use” principle of land use development. Now it is no surprise that the bond ratings are reflecting that unwise choice. And Henry still shows no sign of having grown beyond those unwise decisions.