Moody’s Investor Services, a bond credit rating business, which provides financial research on bonds issued by commercial and government entities, revised the city of Glen Cove’s credit outlook from stable to negative in their most recent report released in June. The rating agency changed their outlook for the city due to the potential that state and county aid may be significantly cut this year because the COVID-19 pandemic.
Moody’s reaffirmed its rating of Baa2 and revised the outlook for the city on the basis that “the biggest risks for 2020 are in aid from the county and state which totals more than $4 million, of which up to $900,000 could be at risk. Without federal support, management believes the city would not receive the $900,000. However, the situation surrounding coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. The negative outlook reflects management’s challenges in bringing the city’s budget into balance coupled with a declining reserve position.”
The New York State Comptroller released a financial budget plan in May, which stated the state anticipates budget cuts that “may affect most of the essential services provided by the State, its schools and local governments. The scale of the potential reductions is deeply troubling. As much as $8.2 billion could be cut from aid to localities spending, while large reductions in funding for State Operations are also planned.” Details on what cuts will take place will be submitted to the State Legislature and have not yet been announced.
In May, Nassau County Comptroller Jack Schnirman released an analysis of the potential financial impact that COVID-19 may have on the County’s sales tax revenues. Under the current phased reopening, the analysis indicates “a potential $156.4 million to $360.1 million drop in sales tax for 2020. This would be a decline of 12.25 percent to 28.20 percent of planned 2020 sales tax revenue.”
Details in Moody’s report stated that the city of Glen Cove will “struggle financially over the next three years following a significant decline in reserves last year.” According to Glen Cove City Comptroller, Michael A. Piccirillo, “the city receives from the Aid and Incentives for Municipalities (“AIM”) program, which provides state aid to all of New York’s cities, towns and villages and as part of Nassau County’s Local Assistance Program, the City of Glen Cove receives an additional source of aid. Based on initial guidance received from those authorities and information published publicly on the loss in sales tax revenues from both the State and County, which account for a major source of their revenues, for 2020, the City had anticipated approximately $4 million in combined aid from those sources and now is at risk by an estimate of approximately 20 percent related to this funding,” Piccirillo said in a statement.
City Councilwoman Marsha Silverman commented on the report on her Facebook page stating, “I have been calling for long-term planning to build reserves since before I was on the council. I have requested a plan to limit non-essential spending in order to make up the potential shortfall from the state and county aid.”