Fitch Affirms Utica, NY’s GOs at ‘BBB’; Outlook Negative

by Shelton on May 11th, 2014

filed under Below Average Credit

Proquest LLC

Fitch Ratings affirms its rating on $18,115,000 of Utica, NYs (the city) outstanding unlimited tax general obligation (ULTGO) bonds at BBB.

The Rating Outlook remains Negative.

SECURITY

The city has pledged its full faith and credit and unlimited taxing power for debt service on outstanding GO bonds issued prior to 2011. A 2011 state statute limits property tax levy increases to the lesser of 2 percent or an inflation factor (state property tax levy cap law). This limit can be overridden annually by a 60 percent vote of the citys Common Council. No exemption is made under the tax cap law for debt service on outstanding GO debt; however, the constitutionality of this provision has not been tested.

KEY RATING DRIVERS

NEGATIVE OUTLOOK MAINTAINED: Fitchs maintenance of the Negative Outlook reflects ongoing concerns about the citys challenging financial profile as well as concerns around timely financial reporting. Fitch believes that the citys current financial position will remain challenged despite positive projections for 2013 and 2014 with marginal reserves and scant flexibility for error and unforeseen events in execution of its budgets. Also, the audit for fiscal year end March 31, 2013 has yet to be finalized, which Fitch believes is evidence of a lack of efficient managerial collaboration.

SLIM LIQUIDITY: The citys cash position is tight, which was managed with cash-flow borrowing for the previous three fiscal years. Borrowing is projected to remain stable for fiscal 2015 and Fitch expresses some concern about market access given the below- average rating.

WEAK SOCIO-ECONOMIC INDICATORS: The citys socioeconomic indicators are weak, with below-average wealth and income, elevated unemployment, and low per capita market value.

MIXED LONG-TERM LIABILITY PROFILE: Fitch notes as a credit positive the citys manageable carrying costs for debt service, pension and retiree healthcare and rapid amortization of direct debt. Overall debt levels are moderately high and the city participates in the states well-funded pension plan, costs for which may pressure future budgets given some payment deferrals.

RATING SENSITIVITIES

FINANCIAL PERFORMANCE: The rating is sensitive to managements ability to respond to negative financial developments given the citys lack of reserves and limited balancing options. Restoration of a comfortable financial cushion would stabilize the rating.

LATE REPORTING: Fitch expects that subsequent audits will be released in a timelier manner. A lower rating level may be appropriate and Fitchs ability to maintain a rating may be compromised should additional substantial delays in financial reporting occur.

CREDIT PROFILE

Utica is the county seat of Oneida County (A+/Outlook Stable) and is located in central upstate New York in the area commonly known as the Mohawk Valley. The citys chronic population out- migration trend appears to have moderated and shows early signs of reversal, with an estimated population of 61,992 in 2011.

CHALLENGED FINANCIAL FLEXIBILITY AND DEPLETED RESERVES

The city experienced largely positive operations through fiscal 2009 after fiscal trouble in the early 1990s. Since 2010, this operating trend has reversed with recessionary revenue pressure. The citys general fund operating deficits after transfers over the past three years resulted in a very weak $47,000 unrestricted fund balance (0.1 percent of general fund spending) at the end of fiscal 2012, deteriorating from an adequate $4.6 million or 6.9 percent unreserved balance in fiscal 2009. Negative results were driven by aggressive revenue budgeting and departmental overages.

IMPROVED FINANCIAL PERFORMANCE BUT CHALLENGES REMAIN

The citys draft audit for fiscal 2013 shows a moderate addition to fund balance of $931,000 (1.5 percent of spending and transfers). The citys improved financial performance reflects a 7 percent reduction in general fund staffing as well as a 10 percent increase in the citys property tax. Property taxes are the leading source of revenue for the general fund, accounting for roughly 35 percent of the budget. Additionally, the city continues to participate in the states pension cost deferral program for a portion of payments, and sales tax revenues are an estimated 1.3 percent over budget.

The city projects further positive performance of around $1 million in fiscal 2014, driven by changes in health care plans and favorable variance to budget in sales tax, up 0.9 percent. The citys estimate incorporates $2.1 million of unbudgeted one-time back pay related to the settled police union contract. These projections, if confirmed in the citys 2014 audit, will bring the city closer to its charter-mandated fund balance policy of 3 percent.

The citys 2015 budget increases spending by a manageable 2.3 percent and includes another notable increase in the property tax levy by 8.73 percent. A 3 percent increase in sales tax over 2014 actual may be somewhat aggressive despite additional retailers opening in the city.

However, some one-time expenses have not been budgeted but which may be covered by the citys budget contingency. The city remains reliant on revenue outside its control with state and federal funding representing 31 percent of fiscal 2012 revenues.

CONTINUED LATE AUDITS

The citys 2013 audited financial statements (March 31 fiscal year end) are over three months late from the citys ongoing reporting requirement (ie, 270 days from close of fiscal year). The 2012 audit was similarly late. A new auditor was involved in the 2012 and 2013 audit. Fitch expects that subsequent audits will be released consistent with the citys continuing disclosure reporting requirement.

LIQUIDITY DEPENDENT ON BORROWING

The citys high dependence on liquidity borrowing remains a credit risk, despite decreases in annual cash flow borrowing. In 2013 the city privately placed two short-term cash flow notes totaling $12 million or a high 19 percent of revenues. The citys cash flow borrowing declined to $6.9 million, or a moderate 10.9 percent of revenues in 2014 as a result of the citys change in frequency of property tax remittances to Utica City School District. The city has authorized similar cash-flow borrowing for 2015, at $7.2 million (10.8 percent), but projects to only borrow $5.5 million (8.2 percent). The citys dependence on the market for cash- flow solutions introduces market-access risk to its financial profile given the citys below-average credit ratings.

WEAK ECONOMIC BASE

The citys socioeconomic indicators are weak, most notably reflected in the citys individual poverty rate which is twice the national average. Consistent with the upstate New York region, income and wealth levels are low, with median household income at 56 percent and 61 percent of state and national averages, respectively. The real estate market did not experience a boom or bust through the recent economic cycle, and market value has increased 24.8 percent since 2008. However, market value per capita is weak at $23,000 and assessed valuation has incrementally declined each year since 2008, down an aggregate 1.7 percent and down marginally (0.1 percent) for 2015. Fitch believes that the citys middle-term economic and financial prospects remain constrained. Positively, the city has seen some increases in its current real property tax collections, up to 96 percent from 94 percent in 2012.

The services sector remains a major contributor to the local labor market, with entities such as Metropolitan Insurance, Bank of America, and Mohawk Valley Network, a major medical facility, as well as other health care and social service providers operating in and near the city. The regional economy has seen some improvement with the successful gaming operation at the Oneida Indian Nation, the areas largest employer, as well as the redevelopment of Griffiss Business and Technology Park (formerly Griffiss Air Force Base) in nearby Rome. Bass Pro Shops has opened a retail location within the city which the city believes will provide additional sales tax revenue. Additionally, the city has seen some investment in its downtown and sizable investments in nearby Marcys State University of New York nanotechnology center.

The city unemployment rate was an elevated 7 percent in December 2013, notably down from prior year (9.5 percent); and above state (6.6 percent) and national (6.5 percent) averages. Negatively, the sharp dip in the unemployment rate was driven by a 1.5 percent labor force contraction.

FIXED COSTS MAY CHALLENGE FINANCIAL FLEXIBILITY

The citys debt profile is mixed, with low overall net debt per capita of $1,516, but an elevated 6.5 percent of market value reflective of the citys weak tax base. Amortization is rapid, with 81 percent of outstanding debt retired in 10 years. Carrying costs related to debt, pension, and other post-employment benefits (OPEB) are a currently manageable 19.4 percent of 2012 governmental fund spending. The citys participation in the state pension payment cost stabilization plan somewhat tempers its manageable carrying costs. The city most recently deferred approximately 20 percent of its required payment for 2014 and expects to defer the same amount in 2015.

Fitch expects these costs to rise though remain manageable with deferred pension payments. The city does not currently prepare a multi-year capital plan and continues to contemplate low annual borrowing for maintenance needs.

As of April 1, 2012, the citys OPEB liability totaled $56.4 million or a high 3.9 percent of market value. The city currently funds its liability on a pay-as-you-go basis, paying $3.5 million (4 percent of spending) in fiscal 2012, below the $6.3 million ARC. The city participates in state-run defined benefit pension plans which are well-funded under the aggregate cost valuation method.

Additional information is available at fitchratings.com.

In addition to the sources of information identified in Fitchs Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, Samp;P/Case-Shiller Home Price Index, and IHS Global Insight.

Applicable Criteria and Related Research:

–Tax-Supported Rating Criteria (Aug. 14, 2012);

–US Local Government Tax-Supported Rating Criteria (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=686015

US Local Government Tax-Supported Rating Criteria

http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=685314

Additional Disclosure

Solicitation Status

http://fitchratings.com/gws/en/disclosure/ solicitation?pr_id=827435

((Comments on this story may be sent to health@closeupmedia.com))

How Do I Establish Credit After Bankruptcy Discharge?

by Shelton on May 11th, 2014

filed under Secured Credit

Dear Bankruptcy Adviser,

I am trying to rebuild my credit after receiving a bankruptcy discharge. I had pretty decent credit prior to bankruptcy, but my debt got out of hand. What are the chances of getting an unsecured credit card or loan, or should I just wait to apply?

– Antonia

Dear Antonia,

You definitely can get unsecured credit cards after receiving your bankruptcy discharge. In fact, I am surprised you have not received quite a few offers already. There are many credit cards for bad credit.

The creditors know you can file Chapter 7 bankruptcy only once every eight years and receive a discharge of your debt.

You are also more likely never to file again. The majority of those who seek bankruptcy protection do so only once in a lifetime. This makes you a candidate for new cards since you now have no debt.

While the offers are not very good because of the high interest and annual fees, you do need to start somewhere. You can do searches for Cards for bad credit after bankruptcy or credit loans after bankruptcy.

The ultimate goal after bankruptcy is to try and establish new credit with credit unions and banks. While you may have a better chance to get credit from finance companies, the credit tradeline from a credit union or bank does look better as you begin to rebuild your credit.

Credit unions and banks will give you lower credit limits to start. But your bad credit will improve faster because future lenders look more favorably on an application when you re-establish with mainstream lenders.

What is an unsecured credit card?

Unsecured credit cards are the most common type of cards available. Unlike secured credit cards, you do not need to supply a deposit, or collateral, in order to receive credit. This also means that by failing to pay on an unsecured credit card, issuers will use the courts or wage garnishment to collect unpaid debts. Unsecured credit cards are offered to customers based on credit history, financial strength and earnings potential.

You can start by applying for secured credit cards or credit loans. A secured card or loan means you give the bank some money to hold, and the bank gives you a credit limit equaling that amount. For example, you give the bank $500, and you get a credit limit of $500 on a credit card.

The same works for a credit loan. Sometimes, the credit union or bank will give you a $1,000 loan when you deposit $500 into an account. You will not be able to access those funds unless your loan balance is less than the deposit. After usually six to 24 months of good payment history, the lenders may offer you unsecured credit cards or loans.

You will need to work on rebuilding your credit every month. Failure to start immediately will only delay your ability to buy a house or finance a car. Dont wait.

Ask the adviser

To ask a question of the Bankruptcy Adviser, go to the Ask the Experts page and select Bankruptcy as the topic. Read more Bankruptcy Adviser columns and more stories about debt management.

Bankrates content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrates Terms of Use.

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Quinn Leads Rauner in Campaign Cash

by Shelton on May 11th, 2014

filed under Personal Funding

Get ready for a pricey Illinois governors race.

Gov. Pat Quinns campaign fund is flush with nearly $8.8 million, Crains Chicago Business reports. While his Republican opponent, Bruce Rauner, managed to raise about $9 million this year, he spent most of it to win the GOPprimary in March.

As of March 31, Crains reports Rauners camp has about $1.4 million left, giving Quinn a clear edge in money.

Money drove Rauners political identity early on, and his primary election challengers took notice, criticizing his cash and connections. This year he managed to break a record for personal funding in a campaign for Illinois governor.

Rauner is gaining in other ways. An early Rasmussen Reports poll released Monday showed him grabbing 43 percent of votes from likely Illinois voters, while Quinn took 40 percent and 10 percent were undecided.

Quinn and Rauner met for the first time in the 2014 campaign for Illinois governor last week at a meeting with the Illinois Education Association in Chicago.

Quinn called Rauner the biggest threat to public education in the state of Illinois. Rauner has called Quinn the worst governor in America.