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Agresta recommends city holds on borrowing until rating improves

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Controller Matthew Agresta. Photo by Tim Becker.

Controller Matthew Agresta said on Wednesday that Amsterdam should hold off on any new borrowing until the city’s Standard and Poor (S&P) rating improves. The city’s rating was downgraded in 2012 from a rating of “A” with a stable outlook to “A” with a negative outlook. The downgrade was due in part to the late filing of NY State audit reports (AUD).

Agresta said he was optimistic that city’s rating would improve once all the previous year’s audit reports are accepted by the state, a process he hopes will be completed by the end of the year.

“The reason, in my opinion, that we shouldn’t be doing huge bonding projects now is because…bonds are 20-30 years long. If we are going to have an increased interest rate of 2 to 3% because of the situation we are in, depending on how much you are bonding for, that’s hundreds of thousands of dollars you’re going to pay extra over the life of that loan.”

Agresta said that if necessary, the city could still use a Bond Activity Note (BAN) which is a one year loan that can be rolled over up to 5 years. He said for BAN amounts under $1 million, the city’s rating wasn’t a significant factor on the interest rate.

According to Agresta, the AUD report for years 2010-2011 was completed last year. Work on the 2011-2012 report is essentially complete and all follow-up questions from the state have been answered. Agresta says he expects the state to approve the report shortly. Once the 2011-2012 report is completed, Agresta expects the 2012-2013 report to take significantly less time.

“The 2011-2012 year was the year that the transfer to the new system took place. So a lot of the issues that began in that year we are hopeful that we’ve corrected in that year so that they do not carry forward,” said Agresta.

Agresta said he doesn’t expect to meet the October 31st deadline for the 2013-2014 report, but plans to start work on it around that date with the goal of completing it by the end of 2014. Once that is done, the city will be up-to-date with all its required reporting and will have an accurate fund balance number to work with.

Several common council members have recently expressed concern that “we don’t know where we stand” with respect to the city’s fund balance. Agresta said that as long as revenues and expenses fall in line with the approved budget, that knowing the exact fund balance is not critical to making spending decisions because the current budget does not call for any use of the fund balance.

“If you bring in enough money to pay for what you are spending in that year, you shouldn’t have to touch fund balance. Regardless of what that total is, you don’t want to touch it unless necessary,” said Agresta.

Agresta said he monitors the city’s cash flow on a regular basis to make sure that the city is able to meet its obligations. “I regularly check what we have in our overall expense account to make sure that we are not getting anywhere near a situation where we are going to have bills out there that we can’t cover with what we have in the bank,” said Agresta, “It’s never even been close.”

About Tim Becker

Tim Becker is the owner of AnthemWebsites.com LLC which publishes The Compass. He serves as both editor and a writer.

2 Responses to Agresta recommends city holds on borrowing until rating improves

  1. Robert Spagnola says:

    I think Matt should be commended for all he has accomplished in such a short period of time. We are very fortunate to have him.