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UTICA (N.Y.) GENERAL OBLIGATION RATING REDUCED TO 'BB' BY FITCH -- FITCH FINANCIAL WIRE --

 UTICA (N.Y.) GENERAL OBLIGATION RATING REDUCED TO 'BB' BY FITCH
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Aug. 18 /PRNewswire/ -- Utica, N.Y.'s general obligation bond rating is reduced from "BBB" to "BB" by Fitch. The rating change applies to $26.9 million in outstanding bonds. The rating downgrade results from the city's poor financial practices and structural budget imbalance, which will cause it to issue deficit financing bonds for the second time in six years. The credit trend is uncertain.
 The city's financial condition has weakened considerably over the last two years as it has failed to take budget balancing actions to offset the loss of state aid as well as provide fully for police and fire pension and other costs this year. The city incurred a $611,917 general fund operating loss in fiscal 1991 and an estimated $2.2 - $2.6 million operating loss in fiscal 1992 ended March 31. The city issued a $1.7 million budget note at the end of fiscal 1992 to cover unanticipated pension costs.
 In the current fiscal year, the city failed to budget approximately $4.6 million in police and fire pension and social security costs to avoid a large property tax increase. Police and fire pension costs are currently estimated at $1.7 million less than originally anticipated. The accumulated general fund deficit is now estimated in the $4 - $5 million range, or about 13 percent - 16 percent of the budget.
 The state recently authorized the city to issue up to $9.8 million in deficit financing bonds with a term of up to 10 years to eliminate the accumulated deficit and permanently fund the budget note. The bonds will be issued in phases, likely beginning early this fall as the state comptroller must determine each year's operating deficit. The city expects debt service on the bonds to be met from the city's share of a 1 percentage point increase in Oneida County's sales tax, which is projected to provide the city with $2.3 million annually.
 However, the city still has a structural imbalance between recurring revenues and expenditures. It is exploring several options to restore its fiscal health, including cutting health care costs, consolidating fire companies, and regionalizing water and other government services.
 -0- 8/18/92
 /CONTACT: Stewart Simon of Fitch, 212-908-0508/ CO: ST: New York IN: SU: RTG


TS -- NY044 -- 0950 08/18/92 12:17 EDT
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Publication:PR Newswire
Date:Aug 18, 1992
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