Improved financial conditions bolstered by additional state aid drove Jamestown, New York, back to investment grade following years of budget deficits.
Moody’s Investors Service upgraded Jamestown’s issuer and general obligation limited tax obligation ratings to Baa3 from Ba1 Wednesday citing modest budgetary improvements while facing limitations on raising new revenues. Jamestown, whose credit outlook was concurrently revised to stable from negative, has limited revenue-raising powers because the city’s property tax levy cap is near its limit under the state’s tax cap law.
“The upgrade of the city's issuer rating to Baa3 reflects the city's improved, but still somewhat narrow financial position, and financial operations that remain restricted given limited revenue raising ability and inability to make significant budgetary cuts,” Moody’s analyst Tatiana Killen wrote in a report Wednesday. “The rating also reflects the city's modestly-sized tax base with a weak wealth and income profile characterized by low resident incomes, high poverty and unemployment levels, and above average debt and pension burdens.”
In October 2016, Moody’s downgraded the city’s GOLT rating three notches to Ba1 from Baa1 due to structurally imbalanced budget operations resulting from utilizing one-time revenue sources.
Killen noted that aid provided by the New York State Financial Restructuring Board helped stabilize Jamestown’s fiscal conditions with $1.5 million of the assistance used to implement a Medicare PILOT program that provided additional savings in personnel expenses. The city improved its reserves to around $1 million for the 2018 fiscal year, according to unaudited results.
“While the city has reduced personnel almost 24% since 2000 and is currently in the sixteenth year of a hiring freeze, its ability to make further cuts is hampered by the presence of minimum staffing requirements for 77% of city employees,” said Killen. “Structurally balanced operations, finding alternate revenue sources, and ability to implement recurring expenditures remain an ongoing concern for the city.”
Killen noted that Jamestown’s $668 million tax base will remain challenged by a high poverty rate that stood at 30% in 2016 and low wealth levels.
Jamestown, which is 71 miles southwest of Buffalo, has seen a 15% population drop since 1990 to around 30,345. The city has $23.7 million of outstanding GOLT debt.
