Moody’s Affirms Its Baa1 Rating of Youngstown
NEW YORK – Moody’s Investor Service has affirmed its general obligation limited tax rating of Youngstown, Ohio, as Baa1, saying, “The outlook on the city’s credit remains stable.”
Youngstown has $13.7 million in long-term general obligation limited tax bonds outstanding, $8.2 million of which is Moody’s rated.
Municipal bonds that Moody’s rates Baa, its website says, are “obligations judged to be medium grade [investments] and subject to moderate credit risk and as such possess certain speculative characteristics,” that is, the issuer has the capacity to meet its payments but a slowing or sluggish economy or changing circumstances could strain its ability to meet its obligations.
An adverse economy or changing circumstances would include increased unemployment or a decline in income tax collection.
In its detailed rating rationale for Youngstown, Moody’s wrote, “Despite the ongoing efforts of city leaders and businesses, we anticipate that Youngstown’s tax base and economy will remain challenged for the foreseeable future. [The city] has faced a steady decline in population and wealth related to the loss of manufacturing jobs. While revitalization efforts continue, we expect stabilization to be a long-term process. …
“The city’s moderately sized $1.4 billion tax base has continued to experience annual declines, including a 3.5% loss during the city’ triennial update. Overall, the city’s full value has dropped by an average annual rate of 3.6% over the last five years. Concentration within the tax base is elevated, the top-10 taxpayers account for 21.7% of assessed value. Chief among these taxpayers is Ohio Edison Co., (Baa1 stable) at 10.1% of assessed value.”
The 2.75% income tax accounted for 70% of Youngstown’s operating revenues in fiscal 2014, Moody’s said, and the city has budgeted for a 4% decline in total income tax collections in fiscal 2015.
Working in favor of Youngstown, Moody’s noted, are efforts to “rightsize” the services it provides and the infrastructure it maintains. Youngstown State University, with its 1,200 employees, provides a measure of stability to the city, as does it being the county seat and its “sizeable health care sector,” with Mercy Health remaining the largest employer in the city, Mercy has 4,679 employees who pay city income taxes.
Working to the detriment of Youngstown, Moody’s says, are the “socioeconomic indicators, far below state and national averages.” The median income of a family livening within Youngstown is less than half the national average (48.9%) and “property value is weak as well, estimated 2015 full value per capita a low $20,000.” The 2010 median home value stood a just more than a quarter (27.5%) of the U.S. figure.
The lack of education of the residents, as measured by those who hold high school diplomas and college and post-graduate degrees, “will likely lead to challenges for long-term income growth.” Most of the jobs created within Youngstown pay low wages, Moody’s said.
Copyright 2022 The Business Journal, Youngstown, Ohio.