In recognition of Westchester County's prudent management, all three rating agencies in the past week have reaffirmed the county government's AAA bond ratings, County Executive Robert P. Astorino announced Tuesday.
"This is an important accomplishment for us," said Astorino. "The reaffirmation is a recognition that Westchester County is being well managed as it works through a difficult economic environment. We are making tough but smart choices to reduce our workforce and cut spending, while continuing to provide essential services. In practical terms, having three AAA ratings means that our costs when we borrow are kept as low as possible."
However, Astorino noted that one of the agencies, Moody's Investors Service, qualified its rating by putting the county government on a "negative" outlook, based on what it said was too much use of reserve funds to balance its budget. The two other rating agencies, Standard & Poor's and Fitch Reports, maintained the county government on a "stable" outlook.
Despite its concerns, in a report dated July 25, Moody's reaffirmed its AAA rating for Westchester. The other rating agencies, S&P and Fitch reaffirmed, the AAA rating on July 25 and July 20 respectively.
Westchester County currently has a general reserve fund of about $160 million, down from $201 million in 2006. Rating agencies generally want a reserve fund balance to be about 5 percent of expenditures, a criteria Westchester County government currently meets.
"Moody's warning is significant and cannot be ignored," said Astorino. "At budget time last year, I warned the Board of Legislators that they were on shaky financial ground when they dipped into our reserve fund to restore spending cuts that I had proposed. In my State of the County message last April, I said that the county was 'fortunate but fragile.' As the legislators look ahead to the 2012 budget, I hope they will heed this warning."
Astorino added that Moody's has also made it clear in a separate report that what happens to the federal government, as Congress deals with the debt ceiling, could have implications on Westchester County. If the federal government is downgraded, Westchester is one of the 440 AAA-rated local governments that Moody's says is "indirectly linked" to the federal government and could be downgraded as well.
Here are highlights of the rating agency reports:
· Standard & Poors: The AAA rating reflected what S&P said was "maintenance of a strong financial position, despite the recent drawdown of reserves and low-to-moderate overall debt burdens with rapid amortization." The agency noted that the county had made workforce reductions and had consolidated some departments to reduce costs. "The primary strengths are the county's comprehensive budget planning and monitoring policies," the report stated. The report further stated: "The stable outlook reflects our expectation the county will continue to control expenditures in light of the recently passed New York State property tax cap legislation, and maintain its solid financial position and reserves."
· Moody's : The agency said the county has a large and diverse tax base and a strong socio-economic profile, but noted that there will be continued pressure on operations due to the "narrowing" of the reserve and a dependence on "economically sensitive" revenues such as state aid and sales tax and hotel tax. On a positive note, Moody's said the county's debt load was "manageable," and credited the county with recently shedding its obligations to guarantee the debt of the Westchester Medical Center.
· Fitch: Fitch Ratings cited the county's fiscal discipline and modest debt levels as key contributing factors to the high rating and "stable" outlook. Fitch said the county's "active management of expenses" and a "...demonstrated willingness to reduce expenditures to moderate larger budget gaps and budget conservatively" have helped Westchester County to maintain a strong credit profile.