ITHACA, N.Y. — The City of Ithaca’s credit rating was withdrawn by the ratings firm Moody’s for a “lack of sufficient information.”
City officials attribute the withdrawal, announced on March 14, to a backlog of financial reporting and Moody’s tightening its reporting requirements, which were relaxed during the COVID-19 pandemic.
The most recent financial report and audit that the City of Ithaca submitted to the Office of the New York State Comptroller were for fiscal year 2020, according to records The Ithaca Voice obtained through a Freedom of Information Law request.
A spokesperson from the state comptroller’s office said in an email that if the City of Ithaca were current with its financial reporting, it would have had an audit completed for fiscal year 2022. Financial reporting for fiscal year 2023 comes due on April 30, 2024.
In response to questions from The Ithaca Voice, city officials emphasized that fiscal stress did not cause Moody’s to withdraw its credit rating from the City of Ithaca.
“[Fiscal stress] is 100% not the issue. The issue was that we’re behind on the reporting, but we’re getting caught up,” Acting City Controller Scott Andrew said.
Andrew confirmed in an interview that the city’s most recent independent audit was for fiscal year 2020. The 2020 audit, which was conducted by the accounting firm Insero & Co, was submitted to the city on Jan. 23, 2023.
Andrew said Moody’s has the city’s unaudited financial information, but he believes Moody’s analysts want to review the city’s 2021 audit before issuing a credit rating. He added that the 2021 audit will probably be completed no later than mid-May. However, he said there is a chance that Moody’s could ask for more information before issuing the city a credit rating.
Moody’s did not respond to a request for comment from The Ithaca Voice.
Asked if the controller’s office was worried that the city’s credit rating would be withdrawn due to the backlog of financial reporting, Andrew said the office knew it was always a possibility but that the city is in good fiscal health, and that he is not worried.
“It’s always been in the back of our minds,” Andrew said. “I don’t think really anybody’s losing any sleep over it.”
Moody’s last affirmed a credit rating of Aa3 for the City of Ithaca in November 2022. That rating means the city was judged to be “high quality and very low credit risk” for long term loans and have a superior ability” to repay short term debt, according to Moody’s rating scale.
Moody’s placed the City of Ithaca on review on Feb. 1, 2024, and did not rate two rounds of bond anticipation notes (BAN) the city issued in February. Despite the lack of a credit rating, the City of Ithaca was able to raise over $38 million through the BANs.
A BAN is a short-term bond that municipalities can issue to pay for new projects, and are typically issued in anticipation of future long-term bonding.
Fiscal Advisors & Marketing, a municipal advisory firm headquartered in Syracuse, sold the City of Ithaca’s BANs in February but did not respond to a request for comment.
“The fact that the notes were unrated meant that they had a higher interest rate than if the notes were rated,” said John Foote, a lecturer on infrastructure policy at Cornell University’s Jeb E. Brooks School of Public Policy. “It’s impossible for me to know how much higher it was, but without a doubt it was higher.”
Foote called the city’s backlog of financial reporting abnormal.
“I don’t know any other way to say it; it’s abnormal,” Foote said.
City officials have squarely blamed the pandemic for the years-long delay in its financial reporting.
In an email, City Manager Deb Mohlenhoff said, “The controller’s office was stretched thin during the pandemic. Several staff members were furloughed for an extended period of time and then upon return, only brought back at half time.” She added, “Moody’s will calculate our rating as soon as we get them the necessary completed audits.”
However, late reporting is an issue that the City of Ithaca has demonstrated in other areas prior to the pandemic.
The city has not filed financial information in time to receive a score from the Office of the New York State Comptroller’s fiscal stress monitoring system since the 2017 fiscal year end, a spokesperson for the state comptroller’s office confirmed.
The fiscal stress scores are meant to serve as an “early warning system” for officials and taxpayers whose local governments are facing financial problems.
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