Calling New York State Comptroller DiNapoli
Late in 2012, New York State Comptroller Thomas DiNapoli launched the Fiscal Stress Monitoring System, an early warning system for municipal entities in the state that were suffering financial stress. The program’s purpose was described this way in a webinar:
To identify both local governments and school districts that are in fiscal stress, as well as those nearing fiscal stress.
To identify for local officials the need to take actions in a timely manner that change their financial trends for the better.
This has the potential to be a great system for New York’s fiscally weak cities. Having closely followed several municipal bankruptcies in California, I know that public accounting systems are often weak and public officials are unaware of the extent of their fiscal stress until there is no money to make upcoming payroll or debt service payments. At that point there is no space to take corrective action – The Titanic has already hit the iceberg.
Moody’s downgrades to Baa2 from A2 for the City of Poughkeepsie’s (NY) General Obligation debt; outlook remains… bit.ly/141pKy4
— Moody’s Ratings News (@MoodysRatings) January 22, 2013
On Tuesday, Moody’s tweeted about a downgrade of Poughkeepsie, the county seat of Dutchess County, where I live. A Moody’s rating of Baa2 is a mere two notches above junk and a place that no community wants to be. Refinancing debt or raising new debt becomes much more expensive.
The negative outlook reflects the city’s significantly pressured financial position marked by consecutive operating deficits, ongoing structurally imbalanced operations in the General Fund and a negative reserve position. While the city has enacted expenditure reductions to begin to address these issues, Moody’s believes the city’s financial position will continue to be pressured in the near term. Going forward, management’s ability to restore structural balance, while maintaining adequate reserves, will be key to maintaining overall credit quality.
According to Poughkeepsie’s most recent financials (2011, page A-9) the fund balance is now $5 million in the red and the operating deficit has been growing. It looks like Poughkeepsie would be a prime candidate for Comptroller DiNapoli’s new Fiscal Stress Monitoring System.