Fulton, NY GO Bond Outlook Revised To Positive From Stable On Improved Operating Results; 2019 GO Bonds 'BBB+' Rated

WASHINGTON D.C. (S&P Global Ratings) June 21, 2019--S&P Global Ratings revised its outlook on the City of Fulton, N.Y.'s general obligation (GO) bonds outstanding to positive from stable. At the same time, S&P Global Ratings affirmed its 'BBB+' rating on the bonds.
"The positive outlook reflects a number of steps the city has taken over the past couple of fiscal years to improve its finances, including achieving positive operating results and increased general fund reserves," said S&P Global Ratings credit analyst Timothy Barrett.
According to unaudited results, Fulton generated positive operations for fiscal 2018, and we understand the city expects positive operations in fiscal 2019 as well, significantly increasing its financial flexibility. Should the city's improved financial trajectory continue such that budgetary flexibility improves to a level more commensurate with that of higher rated peers, we could see improvement to our assessment of the city's creditworthiness.
S&P Global Ratings also assigned its 'BBB+' long-term rating and positive outlook to Fulton's series 2019 public improvement general obligation (GO) bonds.
The city's faith and credit pledge secures the repayment of the city's GO bonds. We understand Fulton plans to use the series 2019 GO bonds to provide funding for various capital improvements.
The rating reflects our opinion of the city's:
  • Weak economy;
  • Weak management;
  • Strong budgetary performance;
  • Weak budgetary flexibility;
  • Strong liquidity;
  • Very weak debt and contingent liability profile; and
  • Strong institutional framework score.
In our view, the positive outlook reflects a one-in-three chance that we could raise our rating on Fulton, potentially by multiple notches, over the next two years. Specifically, city management has taken measures in the past few fiscal years to address an imbalance between revenues and expenses, shown through its willingness to raise taxes above the cap, while cutting expenses. These measures have helped the city significantly improve available reserves to a level that is no longer nominally thin at the end of fiscal 2018, according to unaudited results. If the city maintains structural balance and reserves at levels that are no longer nominally thin, demonstrating improved management practices, we could raise the rating, all other factors being qual. On the other hand, if the city's operations become unbalanced, resulting in a material draw on total reserves, we could revise the outlook to stable.
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