Ansonia’s Investment Rating Downgraded Again - Twice in Six Years
On December 5, S&P Global Ratings changed Ansonia's debt outlook from "stable" to "negative." The ratings downgrades indicate that the city's financial situation could deteriorate, and if it does not improve, S&P may lower the city's bond rating.A bond rating measures the financial strength of a city. If a city has a better rating, it pays less interest when it borrows money. A worse rating means higher costs to borrow. Higher borrowing costs will ultimately lead to increased property taxes.S&P stated that Ansonia incurred a loss in both 2022 and 2023. The city is also planning to cover its everyday expenses with money from selling its wastewater system, but this revenue is only available once, not annually. The city is doing this because its costs are growing faster than the money it collects from taxes and other sources."Ansonia produced operating deficits in fiscal years 2022 and 2023 and plans to use one-time revenues from the $41 million sale of its wastewater assets to fund operations in fiscal years 2025 through 2030, primarily because expenditures have grown faster than the tax levy and other revenue sources," the report says."We could lower the rating if Ansonia does not make meaningful progress toward eliminating its reliance on fund balance for ongoing expenditures. We could also lower the rating if lower-than-anticipated electricity revenues from the fuel cell project pressure operations or if management practices otherwise deteriorate," the report says.S&P said it could lower Ansonia's rating if the city continues to use its savings to cover regular expenses or if it does not earn as much as expected from the new fuel cell project. Poor management could also lead to a lower rating.S&P's "negative outlook" label indicates that the agency is warning that the city's financial situation could deteriorate soon. If nothing changes, S&P might lower (downgrade) the city's bond rating.If the city's finances do not improve, S&P may make borrowing money more expensive for the city by giving it a worse rating. That outcome would lead to higher interest costs when the city needs to borrow for projects or basic services.S&P had previously downgraded Ansonia’s long-term rating from AA to AA- in 2019, citing multiple years of reserve drawdowns and a decline in available fund balance from 25% to 11% over four years. This earlier downgrade also reflected concerns over the city’s financial flexibility and limited forward-looking planning.