The office of State Comptroller Tom DiNapoli has designated the Village of Valley Stream as a municipality under “significant fiscal stress.” DiNapoli’s report, released last Friday, is a sign that the village still has much to improve in its financial standing, which has deteriorated in recent years.
The state’s fiscal stress system, in use since 2012, considers factors such as year-end fund balance, cash flow, borrowing and operating deficits. The recent report covers finances from the 2020-21 fiscal year, which ends May 31.
With a projected operating deficit of $2.2 million weighing heavily against the village, funds that Valley Stream is to receive before the end of the fiscal year through the issuance of capital bonds and the sale of tax liens were not included in the report, tipping the municipality into the “significant stress” category, the most severe in the system, according to village and state officials.
Although the village’s operating deficit has improved in recent years from $2.6 million in 2019 and $3 million in 2018, Village Treasurer Michael Fox said that the “severe” fiscal stress report was caused by bad timing. For much of the past year, the village delayed issuing bonds to cover the cost of capital improvements because of a volatile market, he said. Additionally, with Village Hall closed last spring, officials were unable to hold the village’s annual tax lien sale. With both funding sources still unaccounted for, nearly $3.5 million in expected cash flow was left out of the report.
“It shows you a little bit of the picture, but not the whole thing,” Fox said. “. . . When we have our lien sale and our bonding goes through this fiscal year, it will look a lot better.”
With the report, Valley Stream is among three villages in the state under “significant” fiscal stress this year, along with Island Park and Wappingers Falls, in upstate Dutchess County. The fiscal stress score is intended as a warning system for municipalities that they may need to change their financial practices, and state officials said that while bad timing regarding the issuance of bonds and the sale of tax liens might have contributed to a more severe rating, the deciding factor in the score remains projected expenses that do not meet village revenue.
“These local communities were already struggling with fiscal stress before the pandemic hit,” DiNapoli said in a statement announcing the latest round of assessments. “Some of that pressure could be alleviated with federal stimulus funds and the restoration of state aid, but the full extent of the pandemic’s impact on local communities is unclear, and the fiscal landscape continues to change. Local officials should remain vigilant in monitoring their financial condition.”
The stress report is roughly in line with another by Moody’s Investors Service, a credit rating agency, made on March 5, in which it revised its outlook on village finances from negative to stable, but reaffirmed Valley Stream’s credit rating of Ba1, which falls in the junk category.
Despite proximity to New York City and favorable borrowing conditions, “the village has had difficulty shoring up its financial position,” Moody’s financial analyst Douglas Goldmacher said in the report. “The village’s fund balance turned negative in 2016, and though improved, it remains negative.”
Village officials have said in the past that they expect it to take years for the village to improve its bond rating and replenish its reserves.
Goldmacher cited better budgeting techniques and an improved fund balance for the revised outlook, but noted that the coronavirus pandemic has had a limited impact on finances overall.
Still, village Trustee Vincent Grasso, who, citing concerns of unforeseen disruptions from the coronavirus pandemic, voted against the village 2020 budget last April, said he believes Valley Stream needs to take a more conservative approach to its budgets.
“The financial implications of the pandemic shouldn’t have taken anybody by surprise, and we’re continuing to wrestle with them,” he said. “I brought this up last year and this year, but I remain one vote in five, and in a representative democracy, the majority carries the day.”