Glen Cove’s credit rating outlook was revised from a stable outlook to negative in a report released on June 15 from Moody’s Investor Services Inc., a credit rating agency, created to bring “transparency, expertise and trust to bond transactions,” according to its website.
Glen Cove, according to the report, stands at Baa2, which is the second lowest investment grade rating Moody’s can issue. The rating has not changed, but Glen Cove’s credit outlook could impact the city in different ways. For one, if the city decides to issue debt, which is a fixed corporate or government obligation such as a bond or debenture, the lender could look at the ratings and determine the risk factor. And generally, the lower the rating, the higher the interest rate a municipality could receive for bonds issues in the future.
“The better the rating, the less risk is perceived and the better rates you receive,” Glen Cove City Councilwoman Danielle Fugazy Scagliola said. “So of course, we want to work to make our rating the best it can be and have our outlook be the best it can be. That’s something you always want to do.”
The negative outlook is a reflection, according to the report, on the city’s challenges to bring the budget into balance along with a declining reserve position that may cause the city to struggle financially over the next three years. According to the report, management appropriated $2.1million in fiscal year 2019 and estimates that reserves’ will decline by nearly $4.3 million.
The fiscal 2020 budget, according to the report, was slightly smaller than the previous year’s, with a property tax increase of nearly 2 percent below the statewide-cap and the reserves trended on budget for the first quarter. However, the pandemic may have thrown these results off track with up to $900,000 in budget risks in state and county aid expected later in the year.
It’s important to note that the report indicates that the budget risks are not likely to impede on 2020 operations. Other than the loss of that revenue, city management does not see any material financial risks associated with the pandemic in fiscal 2020 because the majority of expenses incurred by the city is covered by the federal Coronavirus Aid, Relief and Economic Security Act and Federal Emergency Management Agency support.
Factors that could lead to a downgrade in Glen Cove’s rating include audited results from fiscal 2019 that are worse than expected, a continuance of a downward trend during fiscal 2020 and a failure to adopt and adhere to a balanced budget.
The report also provides ways the city can upgrade its rating, including fiscal 2019 audited results that are significantly better than expected; an end to fiscal 2020 with balanced operations; and fiscal 2021 and beyond growth in reserves that is in line with peers.
In fact, the report states that the Garvies Point project by RXR Realty, the city’s shoreline and other projects are starting to yield positive results for the city. With a rental apartment building complete and a condo building near competition, new residents are starting to move in. And while Covid-19 may have slowed down some construction, the pandemic may make Garvies Point more attractive for New York City residents, as interest in both condos and rentals have increased since the pandemic.
When the Garvies Point project is complete, according to the report, it is expected to include a 1,000 unit residential property, an ecology marina, restaurants and commercial space. This should bring much businesses and jobs to Glen Cove, stimulating the local economy. “I’m looking forward to increasing our tax base and bringing in more revenue,” Fugazy Scagliola said.