Niagara Gazette

November 15, 2013

Niagara Falls' bond rating is recovering

By Justin Sondel
Niagara Gazette

Niagara Gazette — The city's bond rating has now been restored by three major rating agencies.

Moody's Investor Service downgraded the city's rating in January citing the uncertain outcome of the 2002 gaming revenue dispute between the Seneca Nation of Indians and New York state. 

With the issue resolved in June and Niagara Falls in receipt of the $89 million that was held up during the four-year disagreement, Moody's announced this week that it has restored the city's bond rating, bumping it from Baa3 to Baa2.

"The upgrade to Baa2 incorporates the city's the [sic] improved liquidity and reserve position, a portion of which the city is using to balance its 2014 budget," Moody's said in a press release.

The release also cites the city's proximity to Canada and tax stability related to the weak American dollar as well as the tourism industry providing some economic stability and development as positives that caused the agency to restore the rating.

The release also lists ongoing challenges the city faces, including limited revenue raising flexibility and elevated debt burden as issues it will be watching in the future.

"The rating also incorporates the city's weak economy, high unemployment, below average income levels and elevated debt position," the agency said.

Moody's was the last of the big bond rating agencies to return the city's rating to previous levels or remove it from "negative watch" status. Both Fitch Ratings and Standard & Poor's having already restored the city's standing.

Mayor Paul Dyster said comments from city council members quoted by the press casting doubt on whether the city would receive the withheld casino funds before running out of reserves contributed to a "crisis of confidence" in the bond-buying community, which led to the downgrades and negative outlook status from the agencies.

In an article published in May, Councilman Robert Anderson Jr. was quoted in the trade publication "The Bond Buyer" saying it would be a "miracle" if the city received the money it was owed.

"It resulted in our being evaluated by the bond rating agencies at the worst possible time," Dyster said.

Dyster, who maintained confidence that the casino revenue issue would be resolved before the city's cash flow became an issue, urged the agencies to revisit the ratings as soon as the dispute was settled.

Now that the city's bond rating has been restored, it has more options available when planning for the funding of capital projects with more attractive interest rates on any money borrowed, Dyster said.

"It restores the full flexibility to the city for when we want to borrow for a project or when we want to pay cash," Dyster said.

Dyster acknowledged that while the restoration of the city's bond rating is a step in the right direction Niagara Falls government still faces many of the same challenges going forward that it has for years.

"I think what we need to do is address structural issues in our budget," Dyster said.


Big red number Baa2 Moody's Investor Service increased bond rating for the city


Contact reporter Justin Sondel at 282-2311, ext. 2257