New York State counties and municipalities (local governments) have demonstrated stable credit quality recently, which we think continued economic expansion supports, demonstrated by continuous strong sales tax revenue. Sales tax revenue remained robust despite supply chain disruptions and a tight labor market that has greatly affected local government portfolios nationwide.
S&P Global Ratings expects credit quality for New York local governments to remain stable during the next few years despite the shallow recession predicted for the first half of 2023 due largely to positive operations, subsequent to the injection of federal stimulus during COVID-19 and various transformation economic developments statewide. However, concerns over inflationary pressure and a contracting housing market throughout the Mid-Atlantic, possibly affecting mortgage tax collections, remain for local governments.
S&P Global Ratings maintains ratings on roughly 258 local governments, 228 municipalities, and 31 counties. Overall, credit quality has remained stable since March 14, 2022. We raised the ratings on Erie, Nassau, and Suffolk counties within the past year. We also raised the ratings on seven municipalities, including Syracuse and Yonkers, and lowered the ratings on three. In addition, we withdrew eight ratings across New York local governments as debt matured or due to a lack of timely information: However, we withdrew the rating on South Nyack because it dissolved. At 95%, the majority of ratings have a stable outlook while 2% have positive outlooks, 1% have negative outlooks, and 2% are on CreditWatch for a lack of timely information.
- Healthy economy expansion with overall sales tax growth of 12.7% compared to fiscal 2021
- Strong budgetary performance and reserves with average reserves more than 30% of operating expenditures
- Well-funded pension plans and generally moderate pension and other postemployment benefit (OPEB) carrying charges, apart from some notable outliers
- Moderate per capita income while population loss continues statewide
- Potential budgetary pressure from inflationary pressure, rising unfunded state mandates, and possible contractions of economically sensitive revenue such as the sales tax or mortgage receiving tax
- Statutory inability to prefund OPEB, which, due to demographic and medical-cost trends, could exacerbate risks and pressure operations
What We Are Watching In 2023 And Beyond
In 2022, most local governments in New York experienced strong economic recoveries, indicated by growing sales tax receipts and property values, partially offset by rising costs due to inflationary pressure. Encouragingly, the state's growth in the semiconductor industry and offshore wind energy will help with economic stability and expansion, especially in central and western New York. With the restoration of AIM funding and the elimination of distressed-provider assistance, counties have additional sales tax flexibility.
Over the longer term, economic growth will likely depend on overcoming structural issues, such as past deindustrialization and population decreases. In addition, we will continue to monitor possible housing starts and sales contractions, which have an effect on mortgage tax revenue for local governments receiving this revenue stream. Based on S&P Global Market Intelligence forecasts for the state, real income growth should average 1.7% annually, lower than the national forecast.
Spotlight on Environment, Social, And Governance (ESG)
Acute physical risk is a moderately negative consideration in our credit-rating analysis for New York. The state has coastal exposure, particularly in New York City and Long Island, with about 40% of the state's population and a high concentration of the state's economic activity, roughly half the state's jobs. However, chronic risks, such as inland flooding, are also common, notably in the Southern Tier and Mohawk Valley, along flood plains. To address these issues, many localities are performing storm water-management upgrades, coupled with other infrastructure improvements. Furthermore, we see increases in the number of local governments participating and certifying in the state's climate-smart-communities program; this program supports local government efforts to reduce greenhouse-gas emissions and adapt to the effects of climate change, among other reasons. In addition, the program provides funding to participating governments for grants and other initiatives.
We view governance factors as neutral for New York state local governments, primarily from positive governance structure aspects, offset by challenges for pension and OPEB liability risk management. We consider strong state oversight positive. All New York municipalities and school districts are subject to oversight through the state comptroller's fiscal-stress-monitoring system, an early warning system for communities and school districts with fiscal problems. In addition, several municipalities and counties are subject to financial oversight through financial-control boards, such as New York City Transitional Finance Authority, Nassau County Interim Finance Authority, or Erie County Fiscal Stability Authority. We view the state's creation of the Joint Security Operations Center--a cyber-command center, bringing together local, state, and federal agencies and providing a statewide view of cybersecurity risks--as a favorable credit attribute.
However, legal and practical impediments associated with pension and OPEB plan governance from an inability to prefund OPEB challenge New York local governments. Because state law does not permit local governments to create an OPEB trust, we posit unfunded liabilities, which frequently exceed budgets, will likely continue to grow unless major changes occur to OPEB or state statutes.
While we view social capital risk as neutral overall, some regions are experiencing demographic pressure while others have exposure to affordability concerns and an aging workforce, which could pressure operations and revenue-raising flexibility.
|New York Counties: Medians|
|Projected per capita effective buying income (%)||117.8||94.3||85.0||70.7|
|Market value per capita ($)||126,064||115,948||65,702||62,219|
|Available general fund (%)||27.8||29.8||26.8||24.2|
|General fund performance (%)||11.8||12.3||12.6||9.9|
|Cash and expenses (%)||23.8||33.3||35.3||30.7|
|Carrying charge (%)||5.3||5.9||2.8||2.5|
|Pension annual required contribution + other postemployment benefits as a % of expenses||6.2||5.6||6.0||7.5|
|New York Counties: Financial Management Assessment|
|New York Municipalities: Medians|
|AAA||AA+||AA||AA-||A+||A||A-||BBB+ or lower|
|Projected per capita effective buying income (%)||180.3||143.8||125.6||91.2||80.9||72.4||61.7||69.2|
|Market value per capita ($)||353,514||188,376||131,264||74,300||63,224||42,003||35,129||35,255|
|Available general fund (%)||63.5||43.8||49.5||49.1||49.5||37.7||20.5||7.6|
|General fund performance (%)||7.9||5.0||8.5||8.6||6.1||4.9||4.8||2.4|
|Cash and expenses (%)||47.5||50.5||51.3||45.5||53.0||50.2||36.3||15.5|
|Carrying charge (%)||8.3||7.4||8.0||6.9||9.6||10.4||9.7||7.7|
|Pension annual required contribution + other postemployment benefits as a % of expenses||7.0||7.4||6.5||7.8||4.8||6.8||2.8||12.8|
|New York Municipalities: Financial Management Assessment|
|Score (%)||AAA||AA+||AA||AA-||A+||A||A-||BBB+ or lower|
|County Rating List--General Obligation|
|St Lawrence Cnty||A+||Stable|
|*Reflects the rating for Franklin County Solid Waste Management Authority--an appropriation rating for the county.|
|Municipality Rating List--General Obligation|
|Atlantic Beach Vill||AA||Stable|
|Briarcliff Manor Vill||AA+||Stable|
|Castleton on Hudson Vill||A+||CreditWatch Negative|
|East Aurora Vill||AA+||Stable|
|East Bloomfield Town||A+||Stable|
|East Rochester Vill||AA-||Stable|
|East Rockaway Vill||AA||Stable|
|East Syracuse Vill||A+||Stable|
|East Williston Vill||AA+||Stable|
|Great Neck Vill||AAA||CreditWatch Negative|
|Herkimer Vill||A||CreditWatch Negative|
|Highland Falls Vill||AA-||Stable|
|Jerusalem (Twn of)||AA-||Stable|
|Kiryas Joel Vill||A-||Stable|
|Lake George Vill||AA||Stable|
|New Hartford Twn||AA-||Stable|
|New Hartford Vill||A+||Stable|
|New Hyde Pk Vill||AA+||Stable|
|New York City||AA||Stable|
|North Elba Twn||AA||Stable|
|North Greenbush Twn||AA||Stable|
|North Salem Twn||AA+||Stable|
|Ocean Beach Vill||AAA||Stable|
|Old Brookville Vill||AAA||Stable|
|Orchard Park Vill||AA||Stable|
|Oyster Bay Twn||A+||Positive|
|Penn Yan Vill||A+||Stable|
|Red Hook Twn||AA||Stable|
|Sackets Harbor Vill||A+||Stable|
|Sea Cliff Vill||AA+||Stable|
|Seneca Falls Twn||A+||Stable|
|Silver Springs Village||A||Stable|
|South Blooming Grove Vill||AA-||Stable|
|South Bristol Twn||AA||Stable|
|Town of LeRoy||A+||Stable|
|Town of Lenox||A+||Stable|
|Town of Marion||A+||Stable|
|Town of Phelps||A||Stable|
|Town of Riga||AA||Stable|
|Town of Southampton||AAA||Stable|
|Town of Wappinger||AA+||Stable|
|Town of York||A+||Stable|
|Tupper Lake Vill||A||Stable|
|Tuxedo Pk Vill||AA||Stable|
|Upper Nyack Vill||AA+||Stable|
|Van Buren Twn||AA-||Stable|
|Village of Adams||A||Stable|
|Village of Laurel Hollow||AAA||Stable|
|Village of Southampton||AAA||Stable|
|Wallkill Twn||AA||CreditWatch Negative|
|Watkins Glen Vill||A+||Stable|
|Webb Twn||AA||CreditWatch Negative|
|Yates (Twn of) (Orleans Cnty)||A-||Stable|
This report does not constitute a rating action.
|Primary Credit Analyst:||Lauren Freire, New York + 1 (212) 438 7854;|
|Secondary Contacts:||Krystal Tena, New York + 1 (212) 438-1628;|
|Charlene P Butterfield, New York + 1 (212) 438 2741;|
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