To Buffalo’s credit, rating rises
Standard & Poor’s moves city up a notch
By Brian Meyer
NEWS STAFF REPORTER
Updated: 06/14/08 7:31 AM
Buffalo’s credit rating rose to its highest level in 16 years Friday as Wall Street analysts cited the city’s improved finances, better management and the continued presence of a control board.
Standard & Poor’s moved Buffalo one notch up the credit-rating ladder, assigning a BBB+ to bonds. The ranking identifies the bonds as being of medium grade quality. Wall Street analysts also hinted that Buffalo’s credit rating could move into the “A” tier if the city and its unions can come to terms on new contracts.
“If positive financial operations and strong liquidity levels were sustained, particularly as management works through settling the city’s expired union contracts, further credit rating improvement would be an anticipated,” S&P analysts Armen Hratchian and Robin Prunty wrote in their report.
Still, the analysts warned that Buffalo could face fiscal challenges. They cited the city’s “large dependence” on state aid, adding that assistance from Albany could be reduced as New York grapples with its own budget problems. They also cited a weakened economy and unsettled labor contracts dating back several years as factors that could undermine Buffalo’s march toward fiscal stability.
City Comptroller Andrew A. SanFilippo hailed Friday’s action as yet another development that should help to bolster confidence in Buffalo’s long-term outlook.
“It shows the public that the City of Buffalo is alive and well,” said SanFilippo. “At a time when some Rust Belt cities are struggling to make ends meet, we enjoy a record fund balance.”
A New York City-based fiscal consultant to Buffalo said the rating upgrade will lower the city’s borrowing costs.
“The higher the rating, the lower the bond insurance, and that’s worked to our advantage in this instance,” said J. Chester Johnson, chairman of Government Finance Associates.
This was the third time in 18 months Buffalo has seen its credit rating go up.
Meanwhile, S&P announced last month that it boosted the city water system’s credit rating two notches.
Records indicate that the last time Buffalo had a BBB+ or higher rating from S&P was in early 1992. The rating is still seven notches from the agency’s highest rating and remains below the rating of many other municipalities.
S&P analysts mentioned the city’s control board twice in their overview. The Buffalo Fiscal Stability Authority has been monitoring the city and its school district for five years. S&P credited the city and its control board for working together to improve finances.
“Additional stability is provided by the presence of [the control board] and its statutory powers in providing financial oversight,” the analysts wrote.
For more than a year, the comptroller, Mayor Byron W. Brown and Common Council members have been urging state officials to dilute the control board’s powers by turning it into an advisory-only panel.
