Tuxedo Park Village, NY GO Debt Rating Raised To 'AA' From 'AA-' On Consistent Strengthened Reserves

Posted July 27, 2021

S&P Global Ratings raised its long-term rating on Tuxedo Park Village, N.Y.'s general obligation (GO) debt to 'AA' from 'AA-.' The outlook is stable.

"After a couple of budget battles, our financial position improved. I am pleased that S&B Global agreed by raising our rate from 'AA-' to 'AA' with a stable outlook," said Mayor David McFadden. The Mayor continued, “I am proud of our financial team led by Deputy Mayor Tinka Shaw and advisor John Ledwith. Moving forward, the addition of new Trustees Paul Brooke and Joshua Scherer will continue to make improvements in the next two years as they add their financial expertise to the team.”

"The upgrade reflects the ongoing strengthening of the village's reserve position as a result of positive financial results since fiscal 2016," said S&P Global Ratings credit analyst Felix Winnekens.

The credit profile benefits from Tuxedo Park's wealth and income metrics and resilient property tax base, which also funds the vast majority of general fund revenue. Following the use of fund balance for operations over 2013-2015, management implemented many cost-saving measures, especially public safety, and now typically achieves positive variances against budget on the expense side. S&P Global expects Could further safeguard the recent improvement in the reserve position if the village adopts a formal reserve policy, as is currently discussed. In general, the rating remains somewhat constrained by the village's lack of formalized financial policies and plans, as well as a slightly higher debt burden and pension and other post-employment benefits (OPEB) carrying charges.

S&P Global analyzed Tuxedo Park Village's ESG risks relative to the village's economy, management, financial measures, debt, and liability profile. It determined that they align with our view of the sector standard. However, we view the state's governance regarding the lack of a mechanism to refund OPEB as a weakness for New York local governments.

S&P Global could lower the rating should the village significantly draw on reserves for operations or capital projects, leading to renewed pressures on the reserve position.

S&P Global could raise the rating if Tuxedo Park implemented more formalized financial management policies and practices, including a reserve policy that would ensure that its reserves remain at a level we consider firm while its debt and pension liability profile improved.

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