City's credit rating improves

A drone shot this week of downtown Lockport and the sprawling city beyond, looking northeast. The Tri-Way bridge over the Erie Barge Canal is at bottom right and the Big Bridge is at center.  

LOCKPORT — The City of Lockport's credit rating has improved, according to a report released this week by Moody's Investors Service.

Moody's has assigned an “A3” rating to Lockport in its latest financial update — the seventh highest possible rating level that's achievable among 21 possible grades pre-coded by letters A through C (“AAA” being the highest rating possible and “C” the lowest). The city's credit rating a year ago was B3.

“The city has a small but growing tax base with below average resident wealth and income levels, moderate debt and pension burdens, a large and growing OPEB liability, and high fixed costs,” the report states. 

“The city benefits from a recently-improved financial position and return to structural balance as a result of various budgetary adjustments following a cash crunch in 2014.”

Alderman Rick Abbott said the rating bump puts Lockport in a category of municipalities that have the best ability or high ability to repay short-term debts. He cited the city's good financial situation in such unusual times as his main reason for submitting and ultimately passing a resolution at last week's Common Council meeting to initiate a citywide hiring freeze until next year.

Lockport's Finance Director Tim Russo said the A3 credit rating puts the city in a good fiscal position.

“This is great news as we move forward, thinking about projects and just looking ahead at our capital budget,” Russo said. “We're just very happy at this crazy time with COVID that we're in a good standing, financially.” 

Lockport's current “credit strengths,” as outlined in the report, are as follows:

• Limited, but growing tax base

• Increased state oversight through 2025 after issuance of deficit financing bonds

• Improved financial position

The only Moody's ratings that are higher than A3 are A2, A1, Aa3, Aa2, Aa1 and AAA. Worse ratings than A3, in order, are Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3 and Ca and the lowest rating, C.

Despite the modest rating, Moody's did add that Lockport still faces several fiscal challenges, namely the unforeseen future impact that COVID-19 pandemic will have on expenses. Other fiscal “challenges” listed for Lockport, include the following: 

• Large and growing employee benefit and pension burden

• High and growing fixed costs

• Legal outcome with firefighter's union

Factors that could lead to a Moody's upgrade are continued structural balance and improved reserves, significant growth in the tax base and reductions in total leverage.

“We do not see any material immediate credit risks for the city,” the Moody's report concludes.

“However, the situation surrounding coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of the city changes, we will update our opinion at that time. 

Mayor Michelle Roman credited people citywide for the positive credit upgrade.

“The city, as a team, with workers and department heads and especially the finance director (Tim Russo), along with elected officials, have been working diligently to improve our fiscal situation for our community and taxpayers. These efforts have been rewarded with a positive rating,” Roman said.

Founded by John Moody in 1909, Moody's produced manuals of statistics related to stocks and bonds and bond ratings. Its headquarters are at 7 World Trade Center in New York City.

Follow reporter John D’Onofrio on Twitter with “Good Morning, Lockport, N.Y.,” weekday mornings at @LockportJournal.

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