BUFFALO, N.Y. — The City of Buffalo's credit rating was downgraded in three categories by Fitch Ratings, a credit agency, that described the outlook as "stable."
Fitch dropped the city's score to an A+ from AA- on Friday in three places:
- Issuer Default Rating (IDR)
- $65 million of outstanding unlimited tax general obligation (ULTGO) bonds
- $100 million of outstanding limited tax general obligation (LTGO) bonds
Fitch explained the outlook, saying "the downgrade of the IDR and GO ratings to 'A+' from 'AA-' reflects the city's weak operating performance in recent years driven in part by overly optimistic revenue assumptions, and from shortfalls in gaming revenues associated with a contract dispute between the state of New York and the Seneca Nation."
The city's credit rating impacts the amount it pays when it borrows.
The outlook follows a story by 2 On Your Side's nonprofit news partners at Investigative Post, which published a story in July about the city of Buffalo’s finances, calling into question the amount the city has been drawing from a once robust reserve fund, and revenue projections which appeared overly optimistic .
The article revealed the City of Buffalo ran out of money in January, and had to borrow from what might appear an unlikely source: the Buffalo Public Schools.
At the time, Mayor Byron Brown said the article unfairly characterized the city’s financial position as being bleak, beginning with the assertion that the city was borrowing the money from the schools.
Brown issued a statement on Saturday night, in response to the Fitch outlook:
"For fourteen years, my Administration has managed the City’s finances very well; keeping taxes low and controllable expenses down. Buffalo’s economic renaissance has been a direct result of that prudent approach which puts taxpayers first. The City’s bond rating—even with Fitch’s shift—remains stable, is still very strong, and indicates that Buffalo’s municipal bonds remain a very good investment. The 2019-20 budget is structurally sound and balanced without drawing on any reserves.
"With the State advancing a portion of the City’s owed casino revenue, as well as my Administration’s new revenue generating actions that are recurring in nature, I believe there are assertions in the Fitch report that do not accurately assess Buffalo’s financial position. We will continue to work to educate all the rating agencies about how the City is controlling costs and generating new revenues with the expectation that we will be given higher ratings in the near future."