Moody's Investor Services announced a few weeks ago that it has restored the Town of Lansing's Aa3 rating.  The rating had been withdrawn when a policy change required independent audits.  The rating applies to $650,000 in rated general obligation (GO) bonds outstanding.

"Moody’s decided that all institutions receiving a credit rating from them would be required to submit proof an an independent audit of its financial statements," explains Councilman Robert Cree.  "Prior to this Moody’s would accept the Comptrollers sign off on a  municipality’s annual financial statement submission (AUD)."

According to Moody's the Town's GO rating was withdrawn on January 12 due to the lack of audited financial information.  When the Town Board received notice the rating had been withdrawn there was some discussion of whether it was worth it for Lansing to spend the money on an independent audit or simply let the rating lapse.

Ratings on general obligation bonds are important because municipalities with higher ratings are deemed safe investments.  A high rating makes it easier to attract money for public projects.  The highest Moody's rating, meaning the lowest credit risk in Moodys' opinion, is Aaa.  Aa1, Aa2 and Aa3 are also considered high grade ratings.  A1, A2, and A3 are considered upper-medium grade risks, and Baa1, Baa2 and Baa3 medium grade.  All of these are considered to be investment grade ratings.  'Speculative Grade' is Moody's euphemism for high risk.  It encompasses grades from Ba1 through C, the lowest.

In general Lansing only bonds special district projects such as water mains, sewers or street lighting.  Most normal Lansing projects outside the special districts is paid for from reserves or fund balance.  But Cree says that if the Board does not tax ahead to save money for future projects in capital reserves it could offer bonds, for example, to put an addition on or replace the Town Hall.  Several school and fire district projects have been paid for from reserves saved ove a period of years, which meant those projects did not generate additional taxes in a lump when the time came to pay for them.  The Town Board came to the conclusion that it was worth paying for an audit to maintain its ability to raise money for future projects.

"Once the Town of Lansing was notified of this change we discussed for some time whether or not we wanted to pay the additional expense for an annual audit, or let the Town’s credit rating lapse," Cree says.  "We determined it would be in the Town’s best interest to have an annual independent audit done so we wouldn’t loose our rating."

The rating was reinstated two weeks ago after Moody's received a copy of the audit conducted by local accounting firm Ciaschi, Dietershagen, Little, Mickelson & Company, LLP.  Moody's says the rating was reinstated based on 'the Town's moderately-sized tax base, above average resident wealth levels, strong reserves and liquidity, and low debt and pension burden.'

The Moody's report says that Lansing's rating could be higher if one of two things happens.  Substantial tax base diversification and expansion is the first.  Projects like the proposed town center, as well as several projects that are currently under construction or on the drawing board could increase the Town's tax base.  New business would be needed to increase its diversification.

The report says that 'elimination of operational fund balance appropriations and increase in reserves' could also increase Lansing's rating.  Town Board members are currently deliberating on whether they should do just that.  The resolution of a disagreement among board members on how to manage Lansing's fund balance may result in more planned contributions to reserve funds, but the outcome of this discussion is far from resolved.

Lansing's rating report talks about the Town's strengths and challenges at length.  Moody's predicts the $1.2 billion tax base will remain stable because of high-end residential development.

"The town's assessed value has increased at a compound annual rate of 1.7% for the past four years ending 2015," the report says.  "Resident wealth levels are above average, with the town's median family income at 139% of the US median, according to 2009-2013 American Community Survey estimates. At 3.5%, Tompkins County's (Aa1 stable) unemployment rate in December 2014 was lower than the state (5.7%) and national (5.4%) rates for the same time period."

The report goes on to predict that the Town will remain financially strong, due to 'ample reserves and a modest fund balance in the 2013 budget'.  Additionally Lansing's debt is low and it has a modest pension burden.

"The town has demonstrated consistent budgetary management resulting in the maintenance of healthy reserves and liquidity," the report concludes.  "Although the town has appropriated fund balance to fill budget gaps, the appropriations have remained manageable, and the town reduced its reliance on fund balance appropriations in the fiscal 2015 budget. Management has also demonstrated the ability to replenish a portion of fund balance appropriations, allowing the town to maintain ample reserves. Although the town's financial reporting has been delayed for the past two years, management expects fiscal 2014 audited financial statements to be available by July 2015 and for audits to be filed within 12 months of the fiscal year-end going forward."

Lansing Bookkeeper/Personnel Officer and Deputy Supervisor Sharon  Bowman told the board last month that other companies also rate the Town high in fiscal responsibility.

"We had our annual visit from our workman's compensation carrier with a review," said Bowman.  "But going forward we are required to conduct those independent audits."

"That's good news," Cree replied.  "I was able to get access to all the Town's ratings in New York State, and we have one of the highest."

v11i13