After placing the North Highlands Fire District in Philipstown on review in late December, Moody’s Investors Service today confirmed its A1 rating on the district’s $4.25 million in outstanding debt and removed the rating from review.
The North Highlands Fire District was one of 62 local government entities whose bond ratings were placed “on review with direction uncertain” by Moody’s on Dec. 27, 2013. The governments have a total of about $598 million in debt.
The reason for reviewing the ratings was a lack of audited fiscal 2012 financial information, which Moody’s has since received from the North Highlands Fire District. The ratings agency said last month that if it didn’t receive the information within 30 days, ratings could be lowered or withdrawn.
“The A1 rating incorporates the district’s modestly sized tax base, satisfactory reserve levels, and low debt burden,” Moody’s said in a statement.
The North Highlands Fire District’s tax base has declined in the past five years by an average of -2.1 percent a year, but tax collections have sufficiently covered planned expenditures. The district’s $586 million tax base is affluent, with wealth levels above the state average.
“Although the absolute general fund balance of the district is modest at $219,999 (29.2 percent of general fund revenues) at year-end fiscal 2012, we believe the fund balance is satisfactory given the predictable nature of the district’s financial operations,” Moody’s said in the statement. “Property taxes are the main source of revenue at 95.5 percent, and the district has not needed to override the tax levy cap to cover expenditures. However, management notes that the district’s board would be willing to override the tax levy cap, if needed.”
The North Highlands Fire District expects to end the 2013 fiscal year with a small surplus “driven by management’s conservative budgeting practices,” Moody’s said. Its net direct debt is low at 0.8 percent of equalized valuation, and it plans to issue minimal debt in the near term, the ratings company said.
Moody’s listed the fire district’s strengths as high revenue and expenditure predictability and low debt burden. Its weaknesses are a small, declining tax base and modest fund balance. The rating could improve with steady growth in the tax base and significant increase and maintenance of fund balance. It could be downgraded if there were large declines in its tax base and wealth levels, and material deterioration of general fund reserve levels.