Niagara Gazette — The city’s financial standing has taken another hit.
Moody’s Investor Services announced this week that it has downgraded its bond rating for the city of Niagara Falls from Baa1 to Baa3, while assigning a “negative outlook.”
It marks the second time this year the agency lowered the city’s bond rating. In January, the firm dropped its rating to Baa1 from A2 while placing the city’s credit worthiness under review for a possible further downgrade.
Agencies like Moody’s assign bond ratings as a measure of a municipality’s financial condition. Higher ratings are generally viewed as a sign of financial soundness, while lower ratings tend to cause municipal governments to pay larger interest rates when borrowing and, thus, incur additional expenses.
In its statement concerning the ratings downgrade, Moody’s expressed concern about the city’s financial situation, largely as a result of the ongoing casino revenue dispute between the Seneca Nation of Indians and the state of New York.
“The Baa3 rating incorporates the city’s highly stressed liquidity position that the city currently faces given the continued remittance of casino revenue,” Moody’s concluded. “The rating also incorporates the city’s weak economy, high unemployment, depressed income levels, and elevated debt position. The negative outlook reflects the city’s projected depletion of cash as early as November 2013 if the money due from the Seneca Nation is not remitted or an alternate liquidity source is not identified.”
The Senecas stopped paying the state casino revenue agreed upon in the 2002 gaming compact in 2009 because, they say, the state violated the exclusivity clause in that contract. About $600 million has been withheld since, without roughly $60 million of the total owed to the city.
Moody’s acknowledges that, depending on how the conflict between the state and Senecas is resolved, the city’s bond rating could soon be changing again.