Westchester Just Lost Its AAA Credit Rating
Swelling budgets, low reserves, and precarious tax plans paint an uncertain future for the county and homeowners.
Fitch Ratings and Standard & Poor’s (S&P) announced earlier this week that they have downgraded Westchester County’s credit ratings from AAA to AA+. Moody’s, the third of the “Big 3” credit agencies, followed suit, dropping Westchester from Aaa to Aa1. While falling from the highest to second-highest rankings might not sound particularly dire to the average taxpayer, they might very well feel the economic ramifications.
Citing budget shortcomings including swelling expenditures and dwindling revenue streams, along with detrimental tax code changes, S&P said Tuesday that it felt concerned about Westchester’s economic sustainability. Another major factor: Retroactive raises for members of the largest union of county workers, the Civil Service Employee Association, were not budgeted for in 2018, and have been paid out directly from the county’s reserves.
S&P places the county’s reserves at less than 4 percent of its total spending budget by the end of fiscal 2018, while judging future revenue estimates from sources like parking lot sales, collection of Internet sales tax, and the planned 2 percent property tax increase as risky ventures. Should those collectively fall short, the Westchester County government would have to slash spending and raise taxes even higher just to compensate for the region’s nearly $2 billion budget.
Hardest hit by this change might be felt by homeowners. In a county where the average annual property tax exceeds $17,000 — the nation’s highest — combining the $10,000 deduction cap set by last year’s Republican-led tax bill with raising property taxes even higher at a time when the average home value has fallen could make it even harder for residents to sell their homes.
As reported by Bloomberg.com, S&P places the odds at having to further downgrade the county’s rating within the next two years at one-in-three. Fitch Ratings, however, projected a “stable” outlook for the county, noting its reliance on one-time expenditures but also “low long-term liability” while implementing “policy decisions that would close budget gaps.”
County Executive George Latimer, who took office in January, released a statement saying these downgrades were not entirely unexpected, vowing to return Westchester to it’s AAA rating before the end of his tenure as C.E.
“The county is in serious financial stress,” he says. “Regardless of the many steps we are taking to improve our footing, these problems were not created overnight and they will not be solved overnight.