LYNN — On the heels of the City Council approving a balanced $367.93 million fiscal year 2020 budget last week, the city’s financial outlook has been upgraded from negative to stable, according to Moody’s Investors Service.
Lynn’s bond rating remains low and unchanged at Baa1, but Moody’s has revised its outlook based on what it described as the city’s improved operating position after the issuance of a $14 million state loan that allowed Lynn to balance its FY18 and FY19 budgets.
“The outlook also incorporates a balanced budget in fiscal 2020 without the use of one-time revenues as well as expectations that the management team, with the help of the state fiscal stability officer, will maintain balanced operations going forward while addressing key budget drivers,” according to a report from Moody’s.
Michael Bertino, the city’s chief financial officer, credited the improved financial outlook to a coordinated effort between the mayor and council, but said it will take time to improve what Mayor Thomas M. McGee has called the city’s “very low” bond rating.
“I think it took time to get us here,” Bertino said. “It’s going to take time to get us out. I think it’s important that the city continue to live within its means and budget conservatively, and establish strong policies and procedures moving forward, which we’re ready and committed to do.”
In its report, Moody’s said the Baa1 rating reflects the city’s challenged financial position with narrow reserves that has recently stabilized with the help of a state loan, a sizable tax base with below average resident incomes and high poverty, and above average pension and OPEB liabilities.
Moody’s said the rating, which has been downgraded twice in the past three years, also reflects the “manageable debt burden” that is expected to rise with the city’s five-year capital improvement plan and expected annual debt issuance.
Although the budget is balanced, McGee said he expects to appear before the City Council again to request that it be amended based on anticipated savings in health insurance and cost increases due to retroactive raises issued to the city’s dozen unions through collective bargaining, along with a potential increase in state aid when the state budget is finalized.
After the council approved $1.5 million in free cash transfers last week to build up the city’s reserves, its total reserves account for 1.1 percent of the overall FY20 budget. Typical fiscal practice is for that figure to be at 5 to 10 percent, according to McGee, who has said building up the city’s reserves would help improve its bond rating.
