Anderson Sees Bond Downgrade As More Evidence of Decline

Robert Anderson

(L-R): Bob Anderson, Sam Fruscione, Glenn Choolokian, the council majority, understand that if you don't have it, you can't spend it.

"It's clear that someone is watching, and the situation is deteriorating rapidly," observed Niagara Falls Councilman Bob Anderson to the news last week that the city's $69 million in general obligation (GO) bonds have been downgraded by a major credit rating agency, the second such action in three months.

Fitch Ratings made much the same observation as Anderson in its comments on the decision to downgrade the city's bonds from 'A' to 'BBB' and placing the bonds on Ratings Watch Negative: "The city's financial condition has rapidly deteriorated due in part to its failure to adjust to delays in the payment of casino revenues."

Fitch said the bond rating "is sensitive to the outcome of an arbitration hearing between the State of New York and the Seneca Nation, as well as the city's management of its projected large cash fall shortage."

Anderson and the majority on the council have taken the bull by the horns in dealing with that projected shortfall, and have taken a number of difficult and sometimes unpopular steps to rein in spending this year in the face of the financial uncertainty largely hinging on the outcome of the talks between the state and the Senecas over gaming revenues.

The Senecas have withheld more than $60 million in casino revenue due Niagara Falls over the last three years because of the dispute over the exclusivity clause in the Nation-State gaming compact.

Fitch noted the city again included casino revenues in its 2013 spending plan and has conservatively budgeted sales tax revenues at a 10 percent decrease from 2012, and "expects to amortize a portion of its pension payment, and plans to transfer another $2.9 million from the capital fund, completing the depletion of available funds in this account."

The ratings agency went on to state the city budgeted for the use of $2 million of fund balance from 2012 which was not available. According to Fitch, "this shortfall combined with the uncertain casino revenues currently leaves the city with a $6.3 million deficit. Without the availability of further capital funds and with casino funds still at risk, the city anticipates a sizable imbalance for 2014."

"We really don't know what's going to happen [with the arbitration] or whether we'll ever see any of that [casino] money," said Anderson. "And I have seen no plan from this administration on what we're going to do in the event the decision goes against us."

For his part, Mayor Dyster says he's confident the city will get a satisfactory result from the arbitration, and by that he must mean the city will receive the money that is due from the gaming tables although at this point, there is little sign of an agreement.

Dyster says he's confident the rating agencies will give the city another look after the arbitration process is completed. In January, Moody's Investors Services also dropped the city's bond rating to below the "lower medium grade" category.