Fitch Ratings, one of the three major credit rating agencies, has revised Buffalo’s financial outlook upward to “stable” from “negative,” reflecting its expectations of where the city is headed after “significant uncertainty” in the early months of Covid-19.
The upward outlook primarily is due to the stabilization of financial operations from increased sales tax revenue; the receipt of $98 million in New York State Aid and Incentives for Municipalities; the city's $331 million allocation from the American Rescue Plan; and the early repayment of a $25 million revenue deficiency note, the loan the city took out to cover lost tax revenue during the pandemic, according to Buffalo Comptroller Barbara Miller-Williams.
Mayor Byron W. Brown's “Post-Pause” prosperity plan relies on about $50.4 million of the federal funds the city will receive through President Biden's stimulus package.
Fitch also noted the financial results for the 2020-21 fiscal year, which ended in June, are projected to be stronger than previously estimated, Miller-Williams said.
People are also reading…
In addition, the fiscal 2021 budget included $65 million in federal stimulus funds, of which $40 million was actually used, the Fitch report stated.
The upward outlook was welcome news for Mayor Byron W. Brown.
The City of Buffalo's equivalent of a savings account has dropped conspicuously in recent years – down to a zero in unassigned funds since 2018.
“I am very pleased that Fitch Investor Services has recognized the city’s sound fiscal management and growing financial strength and upgraded the city’s financial outlook to stable,” he said.
Brown had remained optimistic about the city's fiscal outlook, even while some Common Council members raised concerns. They noted the uncertainty surrounding state aid, with Albany coping with its own revenue shortfalls and growing expenses fighting the Covid-19 pandemic, as well as Congress' months-long deadlock over an aid package for states and localities. Some lawmakers had even raised the possibility of the city's control board resuming its "hard" status if the city's fiscal situation worsened.
Despite the upgraded outlook, the city’s bond rating from Fitch remained “A." It was reduced from “A+” in September 2020, reflecting Fitch's concern at the time that the city's financial resilience was merely adequate and that its budgeted revenue assumptions were overly optimistic. The combination, according to Fitch, had the potential to further erode the city's financial flexibility in the midst of the pandemic's economic downturn.
It's no secret that Covid-19 has negatively impacted the finances of Buffalo as well as other upstate cities – and that a financial crisis may be imminent.
Credit ratings and outlooks affect interest rates and the city's ability to borrow.
S&P Global Ratings – also known as Standard & Poor's – also had lowered Buffalo’s financial outlook. In February, it went down to “negative” from “stable,” primarily due to budget uncertainties at the time, such as $65 million in revenue from the federal government for Covid-19 aid and $11 million in unpaid casino funds the city has been counting on from the Seneca Nation. But S&P said the outlook could be returned to “stable” if the city received the "one-shot" revenue of federal pandemic relief and about $23 million in state aid that had been withheld.
The city's bond rating from S&P remained “A+.”
Meanwhile, Moody’s Investors Service also released a report in February in which the city’s credit rating and outlook remained “A1” and “stable." The report said that Buffalo benefits from oversight through the Buffalo Fiscal Stability Authority and from a growing local economy that has seen a recent increase in valuations driven by ongoing construction and a recent reassessment.
