The town of Halfmoon, after having its credit rating recently downgraded by Moody’s, has maintained a steady rating from another major bond rating agency, Standard and Poor’s.
Standard & Poor’s has confirmed the growing Saratoga County town’s established AA bond rating, but has changed the future outlook for the town from “negative” to “stable.”
“The outlook revision reflects Standard & Poor’s opinion of the town’s maintenance of very strong reserves in fiscal years 2011 and 2012 and expected operating surplus in fiscal 2013,” according to a March 7 report from the rating agency.
An AA rating reflects “very strong capacity to meet financial commitments,” according to S&P, though it is lower than a AAA rating.
Town Supervisor Kevin Tollisen on Friday said he was very pleased with the news, as it’s an indication that efforts to balance funding and spending are succeeding. In earlier years, the town drew on surplus funds to balance its budget.
S&P routinely analyzes the finances of municipalities that borrow money, including Halfmoon, which has about $40 million in debt from a variety of capital projects. The information is used by investors to determine what interest rates will be charged in the future.
“We believe Halfmoon will likely maintain what we consider its very strong financial flexibility and liquidity. Despite continuous operating deficits, we consider the town’s budgetary flexibility strong; in addition, its reserves remain what we view as very strong,” wrote Standard and Poor’s credit analyst Linda Yip.
Moody’s Investor Services, however, just three weeks ago downgraded the town’s rating from Aa2 to Aa3, with a negative outlook.
Moody’s, in a summary of its rating rationale, wrote that the downgrade “reflects the town’s reduced financial position that has experienced a five-year decline in reserves.” It has also changed its rating rationale to reflect the perceived reluctance of some communities to raise property taxes. Halfmoon has no property tax.
The state comptroller’s office last summer issued an audit that criticized the town for drawing heavily on accumulated reserves in budgets.
The Moody’s Aa3 rating, like the S&P AA rating, remain at the high end of municipal creditworthiness.
In her analysis, Yip said the S&P rating should remain unchanged for the next two years, unless Halfmoon experiences major drops in sales tax and mortgage tax revenue.
“Due to the town’s reliance on economically sensitive revenue, however, we could lower the rating if its revenue streams were to decrease and if any unexpected budgetary pressure were to result in operating deficits that lower the budgetary flexibility and performance scores,” she wrote.
On Friday, Tollisen said that he believes the town has made it through the worst of the economic downturn, but he cautioned that he and the Town Board will continue to carefully monitor 2014 spending. The town budget this year totals $14.3 million.
Adjustments will continue to be made as necessary to maintain a balanced budget with no town tax, Tollisen said. A “budget freeze” he imposed on all departments in January continues, with spending allowed only where critically necessary.