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New York State's Withholding Of $74 Million In Aid Could Create Liquidity Pressure For Certain Municipalities

NEW YORK (S&P Global Ratings) June 25, 2020--S&P Global Ratings said today that a decision by New York State to withhold $74 million in aid could create liquidity pressures for the 12 affected cities.

Of the 12 cities, S&P Global Ratings rates four, each of which received a 20% reduction in scheduled Aid and Incentives for Municipalities (AIM) payments for May and June. Of note, the payments are delayed but not permanently suspended.

The move comes amid the state's budgetary pressures. Although the change to AIM payments is not a major drag on the cities' budgets (shortfalls range from 2.5% of revenues for Yonkers to 5.2% for Syracuse), it comes on top of an already pressured budgetary environment caused by revenue loss associated with COVID-19 and the deep national recession. Moreover, the reduction comes just as the cities were to close their books for fiscal 2020, leaving management teams with limited ability to reduce expenditures.

New York Cities -- Reduced State Aid Payments
City Original May and June payment ($) 20% reduced May and June payment ($) Reduction as % of 2019 general fund revenues Current general obligation rating/Outlook
Amsterdam 698,895 559,116 N.A. Not rated
Auburn 4,934,426 3,947,541 N.A. Not rated

Buffalo

98,361,870 78,689,496 4.1 A+/Stable
Corning 1,438,793 1,151,034 N.A. Not rated
Lackawanna 6,248,337 4,998,670 N.A. Not rated
Long Beach 3,098,294 2,478,635 N.A. Not rated
Rensselaer 693,934 555,147 N.A. Not rated
Rochester 87,807,021 70,245,617 3.6 AA-/Negative

Syracuse

61,800,618 49,440,494 5.2 A/Stable

Watertown

4,619,758 3,695,805 N.A. Not rated
White Plains 3,185,838 2,548,670 N.A. Not rated

Yonkers

97,448,413 77,958,730 2.5 A/Negative
Source: New York State Conference of Mayors, S&P Global Ratings. N.A.--Not available.

We believe the affected cities could use short-term cash flow borrowing to offset the unexpected revenue shortfall, as evidenced by Buffalo's $18 million private placement with JPMorgan Chase Bank N.A. Should the state decide to permanently reduce the payments if no additional federal stimulus is received, leading to liquidity pressure, negative rating pressure could emerge. In addition, should there be a sustained reduction in AIM funding, it could call into question the structural balance of the affected cities' budgets.

S&P Global Ratings will continue to monitor the liquidity position of the affected cities that it rates, their response to the expected revenue shortfall, and the state's decision to retroactively make the delayed aid payments.

This report does not constitute a rating action.

S&P Global Ratings, part of S&P Global Inc. (NYSE: SPGI), is the world's leading provider of independent credit risk research. We publish more than a million credit ratings on debt issued by sovereign, municipal, corporate and financial sector entities. With over 1,400 credit analysts in 26 countries, and more than 150 years' experience of assessing credit risk, we offer a unique combination of global coverage and local insight. Our research and opinions about relative credit risk provide market participants with information that helps to support the growth of transparent, liquid debt markets worldwide.

Primary Credit Analyst:Felix Winnekens, New York + 1 (212) 438 0313;
felix.winnekens@spglobal.com
Secondary Contacts:Nora G Wittstruck, New York (1) 212-438-8589;
nora.wittstruck@spglobal.com
Lauren Freire, New York (1) 212-438-7854;
lauren.freire@spglobal.com

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