Moody’s lowers Niskayuna rating as cash reserves dwindle

PHOTOGRAPHER: Steven Cook

Lagging mortgage tax receipts and high storm damage costs have lowered town cash reserves and prompted a credit agency to downgrade the town of Niskayuna’s rating.

Moody’s Investors Service officially announced the downgrade Thursday, moving the town from Aa2 down to Aa3. A spokesman for Moody’s called the new rating still fairly strong, still investment grade.

Also, Moody’s outlook on the town’s finances was set at negative, meaning there is a risk of a further downgrade in the next year or two, the spokesman said. That comes amid concern that the town will not be able to replenish its reserves to previous levels, spokesman David Jacobson said. He added that Moody’s outlook on the entire state and municipal sector in negative.

Such downgrades can result in higher interest paid on future borrowing, officials said, though Town Supervisor Joe Landry said that remains to be seen. It could have a nominal effect.

He portrayed the downgrade as a minor adjustment, but one the town has had little say in. “Yes, the fund balance has decreased, but a lot of it is because of outstanding factors that I have no control over,” he said.

The main areas of concern putting pressure on the town’s reserves, Moody’s wrote, are that mortgage tax receipts have come in less than budgeted, causing a gap that must be made up. Meanwhile, the town has had storm costs exceed estimates. The town was particularly hard hit by the December 2008 ice storm that felled trees. Town officials estimated 55,000 cubic yards of debris had to be removed town wide.

The result was a reserve that started at $1.5 million in 2007, equal to about 12.7 percent of the revenue flowing into the town, then dropping to $936,000 in fiscal year 2010, or about 7.6 percent of the revenue stream, Jacobson said.

For 2011, another $287,000 is expected to be siphoned from the reserve, Jacobson said. But the proposed 2012 budget, he noted, is slated to use zero reserves.

Landry also cited health insurance and retirement cost increases as financial stressors, saying the town is maintaining services without layoffs.

Landry said he learned of the downgrade Thursday afternoon.

Town board member Jonathan McKinney said he learned about the downgrade early Thursday evening, though not from the town.

McKinney has raised concerns about the town’s reserves previously. He was also more concerned than Landry about the downgrade, saying it will cost the town more to borrow money.

“This is a wake-up call that we need to refocus what we’re spending our money on,” McKinney said.