SARATOGA SPRINGS -- The city has borrowed $6.3 million against future tax revenue as part of a plan to balance its budget in the face of a $14 million to $17 million budget deficit.
Saratoga Springs Finance Commissioner Michele Madigan said the tax anticipation note, which must be repaid within 12 months, was purchased on Tuesday by Adirondack Trust Company, which will be charging a 0.15 percent annual interest rate. The Saratoga Springs-based bank was one of six financial institutions to bid on the bonds, which will be used to cover immediate cash-flow needs.
Separately, the city issued $7.4 million in long-term bonds for capital projects, which sold with a 2.15 percent annual interest rate.
Madigan said the low interest rates the city received were due at least in part to Saratoga Springs having a relatively strong "AA+" rating from financial rating agency Standard & Poors. The city has held that rating for the last nine years, though the economic damage caused by the novel coronavirus pandemic has caused S&P's future outlook for the Saratoga Springs rating to be shifted from "stable" to "negative."
In its rating report, S&P said the city's budget revenue is highly dependent on tourism-related spending, in a sector of the economy that has collapsed since the pandemic struck in March. But the rating agency said the city has strong financial reserves, and there remains underlying strength in the local economy.
"These interest rates demonstrate how important a good bond rating can be as we strive to sustain city services and infrastructure, maintain historic buildings, trails, recreation and open space, and keep the city safe," Madigan said.
In addition to borrowing, Madigan's plan to balance the city budget this year includes drawing $6.5 million from the city's fund balance, asking for $3.4 million in expense cuts by city departments, and achieving at least $277,000 savings from a voluntary employee furlough program. So far, no employee layoffs have been proposed.