Continued reliance on reserve funds and the looming debt associated with the new Glendale Home are giving Schenectady County’s finances a negative outlook, according to Moody’s Investor Services.
The bond credit rating agency issued the warning as the county prepares to sell nearly $3 million in bonds this week to support a number of capital projects. Moody’s, however, maintained the county’s bond rating at Aa1 — the second-highest ranking assigned by the agency.
“The negative outlook reflects a narrowed financial position as a result of the use of General Fund balance to fund county operations, as well as a large upcoming increase in long-term debt associated with a county-owned nursing home,” states the report issued Monday. “The county may be challenged in the near term to regain structurally balanced operations given increasing fixed costs including debt service.”
In maintaining the rating, Moody’s acknowledged the county has a “sizable and relatively stable tax base.” The agency also credited the county for having robust sales tax receipts, “above-average socioeconomic indicators” and a manageable debt profile.
County officials lauded the news, saying the positives of the report outweigh the negatives. Spokesman Joe McQueen said Moody’s raised identical red flags last year, yet didn’t opt to reduce the county’s credit rating.
“The positives have actually gotten better and the negatives are the exact same as they were last year,” he said.
McQueen said the county’s credit rating is also among the best. He said only 3 percent of municipalities in the nation are afforded Moody’s highest credit rating.
“Most municipalities would kill for the double-A rating,” he said.
Legislator Phillip Fields, chairman of the county’s Finance Committee, also saw the positive in Moody’s rating. Though recognizing the challenges ahead, he also believes the county is on firm financial footing that will allow it to maintain an exemplary credit rating even with the sizable bill soon due on the new 200-bed, county-owned nursing home nearing completion on Hetcheltown Road.
“We maintained it last year, we’ll maintain it this year and we’ll maintain it into the future,” he said.
Workers are putting the finishing touches on Glendale, which is expected to be completed sometime in March. Though the Legislature authorized bonding as much as $50.5 million for the project, the total cost to the county is estimated at $44 million.
The county has already issued bond anticipation notes associated with the Glendale project. Bond anticipation notes are short-term debt instruments issued by municipalities to borrow against the proceeds of an upcoming bond. Fields said Moody’s was surely aware of those notes when it assessed the county’s credit rating.
“We have gone out to market with other [bond anticipation notes], so they know full well those are out there,” he said.
Still, the county continues to rely on unallocated reserves to balance its budget. The 2013 budget was balanced using more than $6 million of fund balance, the pot of money unspent in previous budget years.
By year’s end, the county’s reserves are expected to dip to around $29 million. Next year’s spending plan relies on $5.7 million worth of reserves, which could bring the county close to the minimum level of fund balance recommended by the state Comptroller’s Office.
“We certainly have been taking steps to reduce our dependence on fund balance,” said Gary Hughes, leader of the Legislature’s Democratic majority. “We’re not oblivious to the need to do that.”