Summary:
Oneonta, New York; General Obligation
Credit Profile:
US$5.545 mil Otsego cnty GO pub imp (serial) bnds ser 2013 due 02/01/2032
Long Term Rating
A+/stable
New
Rationale
Standard & Poor's Ratings Services assigned its “'A+” rating to Oneonta, N.Y.'s series 2013
general obligation (GO) public improvement bonds. We also affirmed our “A+” ratings on the
city's existing GO debt. The outlook on all the ratings is stable.
Factors that strengthen the rating include our view of:
• The stable local economy, anchored by large employers in health care and higher education;
• A very strong financial position entering into the 20 13 budget year; and
• A moderate debt burden and manageable additional capital needs.
These strengths are offset by our view of:
• Lower household income measures compared with state and national levels;
• Low per capita market values, and
• Continued budgeting challenges stemming from constraints on revenue growth and continued
increases to pension and other employee benefit costs.
The city's faith and credit GO pledge secures the bonds, including a property tax pledge on all
taxable real property subject to the tax limitation law of 2011. Oneonta intends to use the
proceeds from these bonds to fund various capital projects within the city.
Oneonta is in Upstate New York in Otsego County. At approximately 4.1 square miles, it
maintains a population of roughly 13,499.
Health and higher education services anchor the regional economy, which primarily consists of
tourism and dairy farming. Bassett Healthcare, a not-for-profit acute care hospital, serves the
region and maintains roughly 3,500 employees. The city is also home to SUNY Oneonta, a
public four-year university with over 1,100 employees.
Overall, we consider the city's median household incomes low at 60 perecent of the national
level, though we acknowledge that the high student population of SUNY Oneonta and Hartwick
College dampens these measures to some extent.
County's unemployment is below the state and nation. Through November 2012, unemployment
stood at 7.3 percent, virtually on par with what it was a year prior On a regional level, we
anticipate employment growth to remain tepid through 2014, and for the unemployment rate to
decrease slightly.
The city's property-tax base has seen modest declines over the past few years, though there are
some signs of stabilization. Based on our economic forecasts, we anticipate that median home
prices in the Mid-Atlantic region should be flat in 2013 and see some growth in 2014. In 2011,
the median home value was $110,000, or 64 percent of the national level.
On the whole, the city's full-market value per capita is low when compared to national averages
at $30,465 per capita. Favorably, the tax base is diverse, with the 10 leading taxpayers
accounting for 10 percent of total assessed value.
Despite the tepid economy, Oneonta's financial position remains very strong, in our opinion. The
city closed the audited fiscal year on Dec. 31, 2011, with a total fund balance of $10.5 million or
a very strong 80 percent of expenditures. Of that amount, roughly $6.7 million, or 51 percent of
expenditures, was classified as unassigned general fund. In 2012, management is projecting
balanced operations as all revenue items came in as expected, and expenditures were within
budget. On the whole, we anticipate the city will maintain very strong operating flexibility as it
begins its 2013 budget year.
Given the constraints on revenue growth and continued increases to pension and other employee
benefit costs, management has had to control spending by consolidating staff positions and
offering changes to employee health care benefits.
For 2013, the total budget is $14.3 million, virtually flat when compared to the 2012 budget.
Oneonta expects to maintain structural balance and preserve its strong cash and liquidity position
by continuing to make adjustments as warranted. Real property taxes (33 percent of revenues),
sales taxes (32 percent), and state aid (17 percent) are the city’s main general fund revenue
sources. Sales taxes are the most sensitive to economic conditions, but we believe the city has
done well budgeting for this through the recent recession. Favorably, property tax collections are
guaranteed by the county, so the city receives 100 percent of its budgeted tax levy. State aid is
likely to come in as budgeted.
Oneonta just recently went through a charter revision, changing the form of government from a
Mayor-Council form to a Council-Manager form.
Following a review of management policies and controls, Standard & Poor's considers Oneonta's
financial management practices "standard" under its Financial Management Assessment (FMA)
methodology, indicating the finance department maintains adequate policies in most, but not all,
key areas.
The FMA is designed to measure management's policies and procedures as it oversees day-today operations. Highlights include the city's monthly budget monitoring and reporting and
formal five-year capital improvement program that it updates annually.
Despite maintaining strong liquidity and cash reserves, the city does not have any formal
liquidity or any debt management policies. Nevertheless, it remains proactive about preserving
its financial position, and has recently begun preparing informal multiyear projections to better
prepare for future budgeting challenges.
Oneonta's overall net debt burden, including this bond issue, is a low $1,385 per capita, and a
moderate 4.5 percent of true market value. These figures include the city's proportionate share of
overlapping debt from the county and school district. Debt service carrying charges across all
funds was low at 5 percent. We note, however, a portion of that is self-supported through user
charges of the city's water and sewer enterprise system.
Following this bond issue, we believe debt service carrying charges will remain low to moderate.
Amortization of principal debt is average, with the city maturing 56 percent of its outstanding
principal by 2022 and all of its debt outstanding by 2032. Future capital needs are limited and
largely focused on street reconstruction. Through 2016, the city's capital plan totals $14.3 million
and funding sources will be a combination of general fund revenues, New York State Highway
aid, and some additional new bonding.
As for long-term liabilities, Oneonta contributes to the state pension systems. Payments to state
retirement plans in 2013 were budgeted at $1 million or 7 percent of general fund expenditures.
This is an overall increase of 15 percent over the prior year. We understand the city has opted not
to amortize any increases of the contribution as allowed by the state; rather, continuing to make
adjustments to the budget. The city also provides other post-employrnent benefits (OPEBs) to its
employees, which it funds on a pay-as-you-go basis, as the state does not currently permit the
finding of OPEB trusts. Fiscal 2011 contributions totaled $1.1 million or 38 percent of the annual
required contribution. The city's unfunded liability as of Dec. 31, 2011 was determined to be
roughly $38.9 million.
Outlook
We do not expect to change the rating within the two-year outlook horizon due to a stillchallenging budgetary environment stemming both from increasing fixed costs and from
management's inability to raise revenues given tax levy limitations and a slowly growing
economy. In our opinion, the stable outlook reflects Oneonta's very strong general fund balance
and cash reserves. Furthermore, though the city's financial position will likely be pressured over
the next few years, we believe management will continue to make the necessary adjustments to
maintain sound financial operations over the two-year outlook period.
While we do not expect this to occur within the outlook horizon, we note that should Oneonta's
financial position deteriorate significantly and no actions taken to remedy the fiscal imbalance, it
could pressure the rating.
Consideration of a higher rating over time would require tax-base expansion, maintaining very
strong cash reserves, a stronger financial policy framework and a more stable budgetary
environment.
Related Criteria And Research
USPF Criteria: GO Debt, Oct. 12, 2006
Rating Details (As Of January 15, 2013)
Oneonta GO (AGM)
Unenhanced Rating
A+(SPUR)/Stable
Many issues are enhanced by bond insurance
Affirmed
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