The City of Glen Cove last month received its most recent fiscal report card from Moody’s Investors Service, and its financial outlook is improving. The agency upgraded Glen Cove’s credit rating from Baa3 to Baa2.
The new rating means that Glen Cove presents a “moderate credit risk” for bond investors.
According to the report, “The Baa2 rating reflects the city’s sizable and diverse tax base, history of operating deficits and recently improved financial results.”
The agency listed several credit strengths, noting that improved budgeting practices led to operating surpluses in 2015 and 2016. Mayor Reggie Spinello said the city renegotiated contracts in several departments and re-examined retirement plans.
The report also noted that the waterfront development projects are “expected to stimulate tax base growth and economic activity going forward.”
Spinello said that waterfront property that had been off the tax rolls for 30 years is now back on them, and the same goes for the Photocircuts property, which the city just settled a tax lien on for $700,000.
“We’re growing our revenue and managing our expenses,” said Spinello. “The combination of both has been a very good formula.”
On the other hand, the report noted that the city faces several credit challenges, the main one being the negative available fund balance, a result of years of deficits. Spinello expects that by the end of 2017, there will be a positive fund balance and a reduction in the deficit from $62.5 million to $53 million.
Also, in both 2016 and 2017, Glen Cove depended on one-time revenues associated with the sale of the waterfront property to balance its budget.
A higher credit rating will reduce interest payments on the bonds that the city must pay out. Spinello said the city is now going to start bond refunding, which involves buying back old bonds that it has issued with new ones. Doing so, he said, is expected to save the city over $1.3 million over the next 10 years.
Moody’s also gave the city a “positive outlook” for future credit ratings. “We see upward momentum,” said Moody’s spokesperson David Jacobson. “Possibly, the city could get upgraded again in the next year or two.”
The report reflects an expectation that the city will maintain balanced operations, and that reserve levels will increase in the near future. An upgrade would be possible again if the fund balance were to improve and the tax base saw a sizable increase.
There is also the possibility of a downgrade, which could result from a decline in reserves and the continued reliance on one-time revenues, like the waterfront project, to balance the budget.