The City of Peekskill had its Aa2 bond rating reaffirmed on the $57.4 million it still owes, but was given a negative outlook by Moody's Investors Service, the firm announced Friday.
An Aa2 rating, which is the second highest, means the city is is considered high quality and low risk credit wise.
But Moody's warned that pressures from the state property tax cap and labor related costs will impact the city's outstanding debt.
“The Aa2 rating reflects the city's average socioeconomic indicators, moderately sized tax-base, manageable debt burden, and conservative financial management as evidenced by a strong internal fund balance policy,” the firm wrote in a summary explaining its rating. “The negative outlook reflects the city's pressured finances as a result of increased health, pension, and labor costs including one-time labor expenditures, which have narrowed the city's cash reserves and fund balance. Future rating reviews will consider management's ability to address these rising costs while maintaining adequate financial flexibility in line with internal policies and long-term structural balance.”
The city faces the challenges of preserving savings in the midst 2 percent tax cap, increasing costs employee pensions and other fixed expenses, and diminished assessed valuations from tax certioraris, according to Moody’s.
“Future rating reviews will consider management's ability to addressing these rising costs while maintaining adequate financial flexibility in line with internal policies and long-term structural balance,” the firm writes in its summary.