A leading Wall Street agency delivered a holiday message to Buffalo, boosting the city's credit rating to its highest level since 1999.
Standard & Poor's cites Buffalo's improving finances, good fiscal management and the continued oversight of a state control board in its decision to raise the rating a notch, to BBB stable. Until now, S&P assigned the lowest investment grade to Buffalo's general-obligation bonds.
City Comptroller Andrew A. SanFilippo hailed the development as "great news," adding he is confident the upgrade will result in lower long-term borrowing costs.
"You have Wall Street rating analysts recognizing the financial progress the city has made," said SanFilippo, who released a report Tuesday that S&P issued Thursday.
The BBB credit rating assigned by Standard & Poor's isn't exactly a glowing endorsement of Buffalo's finances. The rating basically means that a municipality has an adequate ability to meet obligations but is vulnerable to adverse economic conditions.
"It's significant that we're getting out of the lowest investment-grade category," SanFilippo said. "It shows the marketplace that we're not as much of a credit risk, and bondholders will look upon city bonds in a more favorable light."
SanFilippo traveled to New York City earlier this month and met with analysts to make a case for a credit-rating upgrade. He said S&P's action should help improve Buffalo's image among investors.
"We certainly can't be seen as a city that's on the brink of fiscal collapse," he said.
Still, S&P analysts warn that Buffalo continues to face long-term challenges.
"Buffalo's area economy is vulnerable in that the permanent population is declining and the tax base is stagnant," the S&P report states.
Analysts also cite projected city budget gaps that grow to $63 million by 2010.
"Additional challenges facing the city include hiring and retaining a well-qualified city work force and the resolution of outstanding [union] contracts," the analysts wrote.
But on a positive note, S&P said the city continues to increase the size of its fiscal cushion known as a general fund balance. S&P says the city closed the 2005-06 fiscal year with an $18.6 million operating surplus.
"Additional stability is provided by the continued control presence of [the Buffalo Fiscal Stability Authority] and its statutory powers to freeze hiring and wages," the report says.
If and when the control board becomes an advisory-only panel, analysts stressed, it will be imperative that city officials "diligently work" to craft balanced budgets.
Buffalo's control board was reviewing the S&P analysis and would likely have a response today, an aide to Executive Director Dorothy A. Johnson said Tuesday.
In August, another major Wall Street credit-rating agency said Buffalo's finances are improving. Moody's Investors Service removed its negative outlook on city bonds, replacing it with a positive outlook.
SanFilippo said he is cautiously optimistic that Moody's will eventually boost Buffalo's credit rating.
"While outlooks are important," he said, "the actual rating is most crucial."