Moody's Investors Service yesterday lowered Utica, N.Y.'s credit rating to its speculative-grade category, citing budget problems that have dogged the city for the last two years.
After a general review of the city's fiscal condition, the rating agency cut Utica's general obligation bond rating to Ba from Baa. The decision affects about $28 million of outstanding GO bonds. The downgrade does not affect $17.4 million of outstanding bond anticipation notes.
Moody's said in a release that Utica "has experienced a precipitous deterioration in its financial position" because of cuts in state aid and a reduction in property tax revenues.
"Further, unrealistic budgeting practices including the absence of provisions for pension and social security costs in the current year budget are expected to increase the city's accumulated budget positions," the rating agency added.
Michael Johnston, the agency's vice president of mid-Atlantic ratings, said in an interview yesterday that Utica has an accumulated deficit of about $7 million in its $32 million budget for fiscal 1993, which began March 31. The deficit represents 22% of the city's budget for the current fiscal year, Mr. Johnston said.
However, city Comptroller Lou A. Barile said he expects the accumulated deficit to be lower after an independent audit is conducted this week. "We tried to impress upon them that we have a lot of plans in the oven," Mr. Barile said. "But they didn't buy any of them. "
According to Mr. Johnston, the city said it had various plans to cut expenditures and would get state approval to increase its sales tax. But in citing the downgrade, he said these plans were insufficient.
Recently, Utica received state legislative permission to issue $9.8 million of deficit bonds. The bonding followed a state comptroller's office review, which had harsh words about some of the city's fiscal practices.
Robert Hinckley. a spokesman for state Comptroller Edward V. Regan, said yesterday that the comptroller met with city officials in April to criticize the removal of the city's social security and pension costs from its fiscal 1993 budget. In an attempt to prevent a large increase in property taxes, city officials instead bonded out Utica's social security and pension fund liabilities for the police and fire departments in the current fiscal year a move the comptroller's office strongly protested.
Officials decided to bond out these liabilities after the comptroller's office reviewed the plan for a $9.8 million deficit bond issue, Mr. Hinckley said. The state comptroller's office reviews most deficit bonding deals before the Legislature votes.
"This situation speaks for the need for greater oversight" from, the comptroller's office, Mr. Hinckley said.