An "administrative error" by M&T Bank is blamed for a delinquent debt service payment from Beacon, N.Y., but the mistake did not impact the city's credit rating. Moody's Investors Service announced late on July 6 that it took no action against Beacon's Aa3 general obligation bond rating after it was delinquent in the payment of principal and interest on bond anticipation notes due May 29.
Noteholders being paid in full on June 1, one business day after payment was due, Moody's said.
Moody's analysts Michael Gusta and Valentina Gomez said that Beacon's city management's instructed its financial institution, M&T Bank, to wire the debt service payment after completing all the necessary required protocol for payment. However, the bank was unable to process the transaction until after the allowable time for a same day receipt.
Susan Tucker, Beacon's director of finance, said the BAN payment of $27 million not being submitted on time was all due to the bank not having its internal controls properly in place despite being given a week's notice by the city. She said to avoid a similar problem in the future electronic wire transfers have been initiated by the city to ensure the bank has ample time to process debt service payments on time. City officials have also since met with M&T Bank officials and they also wrote a letter to Moody's explaining the circumstances behind the delinquency.
"They are on notice that this can't happen again," said Tucker of the bank's role in the late payment. "It was a very severe situation."
Beacon, which had a population of 15,441 in the 2010 Census, is in Dutchess County around 65 miles north of New York City.
"Moody's believes the payment delay was due to a banking administrative error, not an impairment of the city's ability to pay, as sufficient funds were available to make the payment," said Gusta and Gomez in their July 6 report. "We believe a recurrence is unlikely given the remedial steps taken and heightened awareness by the city."
M&T Bank did not immediately respond to calls seeking comment. Moody's rates the Buffalo-based bank Aa2 with a stable outlook.