Things are looking up, a little bit, for New Haven’s finances.
It will require some more discipline to keep it that way.
That’s the upshot of the latest assessment from Fitch Ratings, one of the agencies whose ratings help determine how the rate at which New Haven can borrow money.
Fitch Tuesday kept the city’s general obligation bond rating at BBB but revised its outlook from “stable” to “positive.” It cited the hundreds of millions of federal pandemic-relief dollars flowing to the city government and Board of Education as well as the $49 million in extra municipal state aid flowing to the city this year under a revised Payments In Lieu Of Taxes (PILOT) program. Fiscal discipline enabled New Haven to end the 2020 fiscal year with a $2.1 million net operating surplus, as well: Fitch’s report noted that the city’s ability to save money “across most departments” enabled it to offset a $5.3 million revenue loss during the pandemic.
The report (read it here) did cite concerns. Fitch noted that new fiscal year budget anticipates that Yale & Yale New Haven Hospital will increase their voluntary contribution to the city by $4 million. Fitch called that budgeting tactic “not prudent because similar voluntary contributions have not always been achieved in prior years.” Three months into the new fiscal year, that increased money has still not materialized.
“While actions to control growth in certain recurring operating expenditures have been successful, the city had repeatedly relied upon one-time savings from bond refundings and bond premiums to help subsidize operations and restore reserves,” Fitch noted. “[M]anagement of expenditure growth will be paramount in order to avoid future budget imbalances … [T]he overextension of spending without consideration of declines in non-recurring revenues could hamper future operations. Despite the city’s limited gap-closing capacity, Fitch expects that management actions to balance future budgets will include a mix of revenue increases, expenditure cuts and use of reserves.”
Mayor Justin Elicker called the upgrade “good news for the city.”
“Historically the city has experienced some financial challenges due to outsized debt obligations and underfunded pensions — but over the past year and a half we’ve taken many steps to get the city heading in the right direction and this upgrade shows that our efforts are bearing fruit,” Elicker stated in a release. “Capping new debt, increasing our annual pension contributions, and working with our state partners to increase PILOT funding have put us on a new, more sustainable, path.”