Port Jervis Mayor Kelly Decker spoke at length about the city’s recent downgrade by credit rating agency Moody’s on Monday evening at the Common Council meeting. Decker, who appeared to possess a deep understanding of the city’s finances, sketched a candid picture of why the downgrade occurred, yet, drawing directly from the Moody’s report, highlighted several aspects of what may be improving in Port.
According to Moody’s, the downgrade, that occurred on March 16, was caused by several factors including, “Two years of structurally imbalanced operations resulting in narrowed fund balance and liquidity. The rating also incorporates the city’s limited but stabilizing tax base, below average wealth levels, and a growing debt burden.”
The negative rating outlook was highlighted by Moody’s as a reflection of “ the challenges the city faces in restoring structural balance and rebuilding fund balance levels while managing an increasing debt burden.”
What Could Bring About an Upgrade
In its report, Moody’s lists several points that could lead to an upgrade, including, improved liquidity, a trend of positive operations and the replenishment of fund balances. Yet also lists problems with the city’s finances that could lead to another downgrade including, continued structurally imbalanced operations, significant declines in operating reserves in fiscal 2016, further declines in liquidity, and legal security.
Moody’s Responds to Questions from PortJervisNow
Seeking additional information on what Moody’s described as the city’s “structural imbalances,” Moody’s indicated to PortJervisNow this afternoon that the city’s financial imbalance reflects a structural mismatch between revenues and expenditures. Since 2010, operating revenues have increased 9.5 percent, while expenditures have increased 15.9 percent. Revenues have lagged as annual property tax increases have been offset by declines in state aid and slow sales tax growth. Property taxes account for 42.2 percent of revenues, and sales tax and state aid account for 34.8 percent and 13.8 percent respectively. Expenditures have increased due to rising pension, health care and personnel costs.
Port Jervis Mayor Kelly Decker Addresses Several Issues
Decker, who addressed several of the issues in detail, including the structural imbalances, echoed Moody’s emphasizing that while the city’s revenues were indeed up almost 10 percent, but that expenditures had also climbed approximately 15 percent, primarily due to retirement benefits and health insurance cost increases.
One of the specific concerns are the buildings now owned by the city. While Decker mentioned several buildings owned, or previously owned by the city, including 4 Gordon Street, the financial burdens of the buildings and properties were and still are at times in excess of the revenue levels that would be generated by a sale. Additionally, just tearing down some buildings could result in bills for the city that could have added up to $250,000 for building demolition. And though a state grant that had recently been secured that was originally to be used for demolitions, Decker indicated that the funds are prohibited from being used for such projects.
In order to facilitate closing the 2015 budget gap, Decker said he had utilized bond money to pay off debt, instead of using it for new projects as originally intended. But Decker emphasized that funds of this nature are not always available.
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