Under Moody’s New Methodology, Saratoga County Receives Downgrade With Negative Outlook

SARATOGA COUNTY — Moody’s Investors Services’ new methodology for local governments brought 265 U.S. local government general obligation ratings under review on January 15 including Saratoga County which resulted in the service’s recent downgrade of the county’s rating to Aa2 from Aa1 on February 3. The new methodology was initiated in conjunction with the rating agency’s review of the county and attaches an increased weight to debt and pensions, considering them as restrictive to local government’s financial flexibility, as stated in Moody’s Rating Action report published last month. The other change was a reduction in weight attached to economic factors as, according to the report, the service considers some local governments are either unwilling or unable to convert the strength of local economies into revenues. “We placed about 256 counties on review,” David Jacobson said, communications strategist at Moody’s Investors Service. “Some were on review for upgrades, and others for downgrades. Pensions are playing a larger role here. We have had a negative outlook on governments from 2008, 2009 to last year. And we’ve had more downgrades than upgrades, but a majority of our ratings have stayed the same.” In addition, Saratoga County’s outstanding general obligation debt amounted to $59.6 million. This debt played a role in the downgrade as well as the narrow financial reserves in the county’s deficits namely associated with Maplewood Manor, as stated in the service’s Rating Update for the county, adding that the Aa2 rating also positively reflects the sizable tax base of the county, which also has above average wealth levels. The county was rated Aa2 - the third highest rating, Jacobson said. “And Aa2 is still judged as very high quality. The negative outlook means there is the chance of another downgrade in the next 12 – 24 months”. Saratoga County bonds were first issued in 2003. In 2005, the county had experienced consecutive operating deficits after acquiring the nursing home Maplewood Manor, and according to Moody’s Rating Update, the Maplewood Manor placed stress on the county’s General Fund leading to a reduced fund balance on account of subsidies to the nursing home. “The county’s financial strength has improved dramatically,” said Saratoga County Administrator Spencer Hellwig. “Moody’s is focused on the General Fund. Right now we are probably at a minimum of $16 million by the end of 2014. We will not only finish 2013 with a surplus, but 2014 will also finish with a growth. We are methodically building.” The fund balance incorporates the General Fund. Saratoga County moved forward with a fund balance policy last year with the goal of bringing the fund balance up to $23 million to represent 10 percent of the current operating budget, estimated at $230 million. Purchase and sale agreements have been signed for the source of main concern in Moody’s Rating Update, Maplewood Manor. Zenith Care Health Group sent a bid in December to pay $14.1 million for the nursing home. Also, bids for the Saratoga County Landfill were also completed last year, going to Fitch Paper of Glens Falls for $4 million. “We are constantly taking a look at how we can do more with less because such a large part of our budget is beyond our control,” Hellwig said. “We’ve got to be able to find opportunities with the discretionary side, and those are essential services we’re talking about: law enforcement, public works, 360 miles of county roads and couple hundred bridges.” Aa2, as defined by Moody’s investment grade credit ratings, is a credit is of high quality and low credit risk in the long term and has the best ability to repay debt in the short term. By comparison, two ratings ahead is the Aaa rating, the “highest quality and the lowest credit risk” for long-term ratings.