(Bloomberg) -- New York’s Westchester County, home to the wealthy suburbs of Scarsdale and Bronxville, lost its AAA grade from S&P Global Ratings Inc. and Fitch Ratings after drawing down its cash reserves to cover retroactive raises given to government employees.
The county, which borders New York City to the north, had its grade cut one level by both companies Tuesday to AA+. S&P said there’s a one-in-three chance that it will downgrade the county’s bonds again in the next two years as the government contends with budget shortfalls, given how "narrow" its reserves were at the end of the 2017 budget year.
“We remain concerned over the county’s ability to sustainably align revenue and expenditures and rebuild reserves to a level consistent with that of similarly rated or higher-rated peers," said S&P analyst Nora Wittstruck.
Westchester’s general fund balance could fall to less than 4 percent of spending at the close of fiscal 2018, about half the level of reserves the county has previously maintained, S&P said.
The new federal limit on deductions for state and local taxes and mortgage interest could further strain the county’s budget. That could make it harder for residents who pay the the highest property taxes in the U.S. to sell homes, while others could challenge their real-estate tax assessments, potentially weakening Westchester’s biggest source of income.
The average property-tax bill in the county last year was $17,179, the highest in the the U.S. and well over the cap, according to a report by Attom Data Solutions.
Westchester is New York’s third-wealthiest county by median family income, after Nassau and Putnam and has the second-highest per-capita income after Manhattan.
The county’s new executive, George Latimer, has proposed selling parking lots in White Plains to plug a $22 million hole in his 2019 spending plan, according to the Journal News.
To contact the reporters on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net;Danielle Moran in New York at dmoran21@bloomberg.net
To contact the editors responsible for this story: James Crombie at jcrombie8@bloomberg.net, William Selway, Christopher Maloney
©2018 Bloomberg L.P.
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