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Moody’s downgrades St. Lawrence County credit rating

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CANTON — Moody’s Investors Service has downgraded St. Lawrence County’s credit rating, a move which will affect its ability to borrow.

Moody’s dropped the county to Baa1 from A3 for the rating on the county’s bonds for its Canton Human Services building, which has $6.2 million in outstanding debt. Moody’s has also affirmed the negative outlook on the county’s rating.

The firm based the downgrade on the county’s weakening financial position, revenue from a gaming compact that the county may not receive and potential retroactive payments due to expired union contracts.

“The negative outlook reflects Moody’s belief that the county’s finances and reserve levels will continue to be pressured in the near to medium term as the result of a current structural imbalance in its operation, and no definite plan to restore reserve level,” the company said.

The downgrade reflects a financial position for the county that has continued to deteriorate as a result of significantly weaker-than-expected fiscal 2011 financial operating results. The ranking factors in the county’s moderately sized tax base with a below-average socio-economic profile, along with what Moody’s sees as a manageable debt. The negative outlook reflects the expectation that the county will continue to spend down its fund balance, further straining its financial flexibility and liquidity.

Moody’s rating will not help the county’s finances.

“This could negatively impact our ability to bond,” County Treasurer Kevin M. Felt said. “We’ll be a higher risk so the interest rate we pay will probably be higher.”

Mr. Felt said Moody’s reviewed the Canton Human Services building because the county has a lease with the Canton Human Services Initiative, a dummy nonprofit organization formed in 2000 to build and own the office building on Route 310.

“The county still pays the debt for the bonds,” he said. “The county still has the obligation to pay.”

The previous rating of A3 was an indication the county was holding its own, but the use of fund balance to offset the cost of operations led to the decline.

“They look at the fact we’re eating up our fund balance,” Mr. Felt said. “The negative outlook is really a sign of the times, that we’re backed into a corner.”

Other municipalities are facing similar reviews because of the economy, the state’s tax cap and stagnant growth.

“We’re not alone,” Mr. Felt said. “We’re all in the same boat.”

The county still has several notches it could fall before junk bond status, he said.

Last year, the county borrowed $8.5 million because of a cash flow problem. This year does not appear any better.

The state owes the county up to $12 million, the bulk of it in late payments due the Department of Social Services, Mr. Felt said. The money due does not include $3 million from a Indian gaming compact that has not been forthcoming because the St. Regis Indian Mohawk Tribal Council is in a dispute with the state over exclusivity rights. County officials are going to Albany today to plead their case with the governor’s office.

The county will have to pay back the $8.5 million it borrowed at the end of August and may have to borrow to make the repayment.

“That’s a possibility. It’s going to be close. We’re coming into a lull,” Mr. Felt said. “I’m trying to avoid that if at all possible. Cash flow changes so fast.”

If the county does not receive the money it is due in a timely fashion, it will no doubt have to borrow again to continue operating, he said.

Legislative Chairwoman Sallie A. Brothers, D-Norfolk, said the downgrade did not come as a surprise.

“We have been expecting some issues to come up with regard to our credit rating,” she said. “I’m sure it will be taken into account if we have to borrow.”

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