Glen Cove secures credit upgrade from Moody’s
The credit ratings agency Moody’s has upgraded Glen Cove’s credit rating to Baa1, reflecting the city’s gradual fiscal improvement. According to the May 17 report, the upgrade is attributed to structurally balanced budgets, significant reserve growth and the city’s robust tax base. Nonetheless, Glen Cove’s financial position, despite considerable improvements, remains in negative territory, limiting its financial flexibility.
“This upgrade reflects a significant improvement in the city’s financial condition,” controller Mike Piccirillo said, adding that the city’s operating surpluses have totaled about $5 million across the past three years, and the city’s year-to-year bottom line improved from minus $5.4 million in 2020 to minus $545,000 at the end of the 2023 fiscal year. The city has accumulated a surplus in its operations budget during that span.
The report states that while reserves remained negative at the end of fiscal 2023, fiscal 2024 is already trending positively, and there will likely be a return to a positive fund balance over the next two years.
The new rating is a significant achievement, yet it comes with a cautionary note that Glen Cove’s financial position still has vulnerabilities. Officials say that some of them stem from concerns with the city’s 2016 Master Tax Agreement with RXR Realty Inc., which is constructing a 345-unit condominium complex at Garvies Point.
“I’m really happy that we had an upgrade — this didn’t happen overnight,” City Councilwoman Danielle Fugazy-Scagliola said. “Our controller has done a great job managing the city’s finances. However, we need to be careful. Depending on what happens with RXR, our rating could swing in the other direction. We now have a hole of more than a million dollars in our budget. The school district lost $1.7 million this year as well. It’s a terrible situation to be in.”
Joe Graziose, RXR Realty’s executive vice president, said that RXR notified the Glen Cove school district about the payment pause in January. RXR has had regular meetings with the City Council and the mayor since 2016, he added.
Graziose blamed the economic impact of the coronavirus pandemic for construction delays, but noted that RXR has paid the city a total of $21.5 million in payments in lieu of taxes since January.
“We couldn’t anticipate this pandemic, but we also would never be able to forecast this historic spike in interest rates,” Graziose said. “The inflation wasn’t forecast. It puts a damper on our ability to continue to build when we’re in this economic environment.”
Graziose said he approached the planning board last November to suggest that the Garvies Point project be built in three phases, reasoning that introducing all 345 units to the market at once would be impractical due to the “soft market, high interest rates and slow sales.”
RXR anticipated that the development would be completed this year, but it is not required to finish it by a specific date. RXR is, however, responsible for paying taxes on the land, whether it is vacant or developed, which ensures that it is in full compliance with the agreement.
“We’re expecting larger building permits to come in towards the end of the year that weren’t budgeted, that are very sizable,” Piccirillo said. “They will help offset that potential loss from our RXR PILOT. We’re also working on certain contract negotiations to help increase our sales and revenue.”
Councilwoman Marsha Silverman was skeptical about the long-term sustainability of the city’s finances, likening them to a ship that takes time to turn around but can easily drift back in the wrong direction.
“I don’t really see much in the structure of our finances that says we can continue to improve,” Silverman said. “This rating is definitely a positive thing, but I’m concerned that it masks the reality. The rating we had is like a D minus, and now we’re at a D. Who runs home and tells their parents that they just got straight D’s?”
Silverman added that much of the city’s recent financial improvement is attributable to one-time revenue, from the American Rescue Plan Act and other pandemic relief, which is now either gone or budgeted to be spent this year. But Mayor Pamela Panzenbeck expressed her satisfaction with the credit rating upgrade from Moody’s.
“We’re really looking to minimize our expenses, and we’ve done really well,” Panzenbeck said. “We’re at the highest point we have been in 14 years. Moody’s was aware that we’re not getting this money before they gave us the upgrade. They obviously have a tremendous amount of faith in what we’ve been doing.”
