For the first time in more than a decade, the City of Poughkeepsie received “positive” outlooks from credit rating agencies, including an improved “investment grade” status from one of the reviewing agencies.
Standard and Poor’s Global (S&P) and Moody’s credit rating agencies released their determinations Wednesday, with S&P Global saying the city has reached “investment grade” status for the first time since 2016.
Mayor Marc Nelson noted the significance of these improvements, pointing out that better credit ratings can significantly reduce the costs of borrowing by recognizing lower financial risks to investors through low-interest rates.
Mayor Nelson said, “This is a momentous announcement because it impacts, one way or the other, nearly every resident, business and property owner in the city. Regaining our city’s investment grade quality bond rating was a chief objective of former mayor and now Senator Rob Rolison which has now been achieved thanks to the hard work of the city’s Finance Department, led by Dr. Brian Martinez, and the support of all our city departments.”
S&P’s “BBB (Positive Outlook)” rating assigns an “investment grade” rating, while Moody’s “Ba1 (Positive Outlook)” is their highest rating just below investment grade. In S&P’s ratings analysis, the city was credited with taking a variety of fiscally related actions over the past seven years, including:
- Reducing the general fund deficit from $16 million in 2016 to $6.8 million in 2021
- Consolidating transportation operations with Dutchess County in 2017
- Increasing revenues as part of the strategy to turn around negative fund balances
- Negotiating a new sales tax agreement with Dutchess County in 2022, and
- Building a “well-seasoned management team, with a continued focus on strengthening existing policies.”
City Finance Commissioner Dr. Martinez said, “The assignment of two ‘positive’ outlooks from two different credit rating agencies is evidence of the arduous and meaningful work over many years by the city’s finance team and recent commissioners. Receiving an ‘investment’ grade rating from a major credit agency after so many years demonstrates the team’s long-term commitment to strategically improve the city’s finances.”
Dr. Martinez added, “The city’s finance team will continue its ongoing work to achieve timely compliance reporting, to modernize accounting systems, and implement best practices to reduce unnecessary complexity for our citizens.”
S&P spoke to many of these efforts, mentioning the city’s focus on strengthening and expanding existing policies, crediting the city’s administration and the Common Council for formally adopting new policies to define fund balance and investment objectives in March 2023, and entering into a Municipal Cooperation Agreement with the New York Cooperative Liquid Assets Security System (NYCLASS) to leverage earnings on investment during a historically high return period.
Common Council Chairwoman Natasha Brown said, “The recognition by both these rating agencies that the city’s fiscal condition has continued to improve and is expected to continue to improve based on current conditions, is extremely good news for our community. Having served on the Common Council since 2016, I know firsthand how difficult it is to allocate scarce resources within a city where needs are so great. I want to thank my colleagues on the Council and particularly those who have made it a priority to work collaboratively with the Administration over the years – and I am proud of the work we have done together.”
On top of improving the city’s credit rating to “BBB” investment grade, S&P deemed the city worthy of a “positive” financial outlook, citing a one-in-three chance the city will fully eliminate its deficit in the near future. According to the ratings analyses, the city still has work to do to eliminate the city’s deficit. Paired with maintaining positive operations, these actions “could raise the rating — possibly multiple notches, over the next two years.”
In reaching a decision to raise the city’s credit rating, both S&P Global and Moody’s agreed that stressors remain as fixed costs are expected to grow such as pension and other benefits, and negative fund balances must be addressed to continue to raise the city’s credit rating. Both reporting agencies cited the hard work that has gone into correcting the city’s financial profile; for example, between 2012 and 2015 prior administrations deferred $5.14 million in New York State pension contributions. The current administration made on time payments in the full amount and paid ahead on the past due (amortized) payments. The remaining backlog of $1.12 million is on track to be paid off by 2025.