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The rate is an upgrade from the city’s previous Baa1 rating with an uncertain outlook. According to Moody’s, the upgrade to A3 factors the city's improved financial management, including new legislation giving city management greater control over the Yonkers Board of Education finances.
“Getting this ‘A’ rating is a huge achievement in light of the recent overstatement of revenues by the Board of Education,” Spano said in a statement. “What it means is that we have an honest and workable plan to deal with that shortfall and that as long as we stick to that plan, the city’s financial future is strong.”
Moody’s said the upgrade of Yonkers’ bond rating is a reaffirmation of the city’s large tax base that benefits from proximity to New York City, improved financial management over the past two years and the Fiscal Agent Act, which provides additional security for bondholders to ensure debt will be paid on a timely basis.
“This higher rating is important for every single taxpayer because it means lower interest costs on bonds,” Spano continued. “That’s less money going to bondholders and more money going to hold taxes down and provide essential services. Working together with our governor and state delegation, we have worked out a financial plan that Moody’s has deemed secure and responsible.”
The rating also factors a financial position that is likely to remain slim, a manageable debt profile and a sizable tax base that has experienced significant declines over the past five years, but is expected to benefit from planned development over the long term.
The stable outlook reflects Moody’s expectation that reserves will remain satisfactory, given strong management and the city's new managerial control of school board operations, and despite the recent announcement that the school board will end fiscal 2014 with a large negative reserve position.
Moody’s report stated, “Our belief that the management will continue to offset challenges with sound financial management and conservative budgeting. The issuance of deficit reduction bonds will help significantly with the BOE’s liquidity issues, but city management must bring the BOE’s budget into balance. Failure to do so will likely result in negative rating pressure.”
This is the second bond rating upgrade this year for Yonkers since Spano took office in 2012. Standard & Poor’s recently upgraded its rating of the city’s general obligation bonds to A+, an upgrade of three notches from the city’s previous BBB+ rating.
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