The city of Niagara Falls has hit a trifecta of good grades with the three major U.S. bond ratings agencies.
S&P Global Ratings (formerly Standard & Poor’s) has joined Moody’s Investor Services and Fitch Ratings in raising its Falls’ municipal bond rating from BBB stable to BBB+ stable.
The rise in the ratings grade for city bonds by all three major U.S. agencies was described by City Controller Daniel Morello as “important” and a reflection of “positive improvements in the (Falls’) financial practices.” An improvement in bond grades means that, should the city look to borrow money, they will be able to so at a more favorable interest rate.
A more favorable (lower) interest rate on city bonds makes borrowing money for capital projects less expensive.
Previously, Moody’s Investor Services gave Niagara Falls a bond rating of Baa2 stable, a boost from its previous grade of Baa3 positive.
“(Moody’s) referenced the positive results of the administration’s handling of the (city) budget and growing the fund balance,” Morello said.
The controller noted that Moody’s considered “a combination of everything, all the city’s (accounts) and how they are being used” in determining its rating.
Morello said that since 2017, Moody’s had maintained a bond rating for the city of Baa3, which is its lowest investment grade rating. The new rating increases the investment value of Falls municipal bonds.
The Moody’s decision followed an earlier review of city finances by the bond rating agency Fitch. In its yearly review of the Falls’ fiances, Fitch issued the city a rating of BBB- with a “positive outlook.”
Bonds with a Fitch rating of BBB- or better are considered investment-grade. Lower rated Fitch bonds are generally referred to as “junk bonds.”
Morello said that since 2021, Fitch has continued to raise its outlook for Falls bonds. The ratings agency assigned a “negative outlook” to the Falls in 2021, a “stable outlook” in 2022 and the “positive outlook” for 2023.
Mayor Robert Restaino has said that improving the city’s bond ratings was one of his first term goals.
“That was a goal, to bring some fiscal stability,” the mayor said. “It reflects well on the city that the bond rating agencies have seen that fiscal stability.”
The Moody’s report found that the city’s credit strengths were “conservative budget management”, a healthy growth in tourism after the pandemic that has led to a growth in sales tax revenue and “a trend” of reducing the use of tribal gaming revenue to balance its budget.
Restaino has characterized as a “long term goal” finding a way to reduce the city’s use of so-called “casino cash” to plug budget holes.
Moody’s identified the city’s credit challenges as “limited reserves, elevated poverty and below-average resident income” and large unfunded liabilities for pensions and employee benefits.
The mayor noted the city’s pension costs are set by the state and he said he has been looking at controlling benefit costs by more aggressively bidding insurance and health care contracts.
“We’ve been able to find savings and value as we look at (insurance program changes),” the mayor said.