Moody’s Investors Services has removed its negative outlook on Schenectady County, citing the county’s diverse tax base, increasing sales tax revenue and financial stabilization over the past two years.
The bond credit rating agency issued the outlook Friday, as the county prepares to sell $3.8 million in bonds before the end of the year to support various infrastructure projects and construction of the Phyllis Bornt Branch Library and Family Literacy Center at 954 State St. Moody’s assigned an Aa1 rating on those bonds and affirmed an Aa1 rating on about $45 million in outstanding debt.
The Aa1 rating is the secondhighest rating Moody’s will assign and the highest held by any county in the state. Only four counties in the state maintain it.
“The county’s strong bond rating is attributable to our ongoing focus on cost-saving strategies, strong fiscal management and our strong tax base, much as the result of our unified economic development efforts,” Schenectady County Legislature Chairman Anthony Jasenski said in a statement. “Private-sector economic development activity has increased over the past few years and Moody’s expects ongoing private development efforts to provide greater diversification.”
Moody’s, one of the “Big Three” credit rating agencies, issued a negative outlook for the county last year, citing a “narrowed financial position” that stemmed from the use of fund balance (the pot of money unspent in previous budgetyears) to balance its budgets and an upcoming increase in long-term debt expected from the new Glendale Home, the county-run nursing home in Glenville.
But in the past year, as the county demonstrated less reliance on its fund balance and the new nursing home opened in May about $5 million under its $50 million budget, those issues were eclipsed by the county’s strengths, said county spokesman Joe McQueen.
“The negative outlook was based on a much bigger picture,” he said. “Our rating was still good. It was still the highest in the state. But the negative outlook is a warning that, hey, you need to keep an eye on these things.”
This year, Moody’s warned that the county still has a “narrower financial position” than its peers and an above-average debt burden tied to the Glendale Home. The rating also incorporates the county’s “manageable debt profile” and “modest pension burden.” But its strengths — a substantial, diverse tax base and favorable sales tax trend — were promising enough to scrap the negative outlook.
“The removal of the negative outlook incorporates the stabilization of the county’s financial position over the past two years,” Moody’s said in a news release issued Friday. “The county has cut costs and increased property taxes, andalso benefited from increases in sales tax receipts to attain financial stability.”
Sales tax receipts increased nearly 3.3 percent in the first three quarters of 2014 compared with the first three quarters of 2013, from more than $68.5 million to nearly $70.8 million. Fourth-quarter sales tax receipts aren’t tallied yet.
McQueen also pointed out that the county has made a continued effort to rely less on its fund balance. In 2013, it used more than $6 million from those reserves, which were on track to dip to around $29 million. This year it budgeted $5.7 million from the reserves and expects it won’t actually use that entire amount.