New York’s Strongest Economies Remain Fiscally Weak

September 28th, 2015

This week we update a comparison of economic strength and fiscal health for New York State Counties, we look at the impact of MCDC on the number of 15c2-12 filings, and highlight one piece of good news for Puerto Rico.

New York’s Strongest Economies Remain Fiscally Weak

Last week, Thomas DiNapoli, the Comptroller of the State of New York released updated Fiscal Stress Scores for local governments in the State of New York.

The focus of the Fiscal Stress Monitoring System is measuring the fiscal health of the municipalities using a “Fiscal Score.” The Fiscal Score grades a municipality on a scale of 0% to 100% (lower is better) and is calculated based on 7 to 10 financial variables.

The credit quality of a municipality is a function of both financial variables and economic and demographic conditions. We created the chart below to combine the financial information contained in the Fiscal Score with our DIVER Geo Score which measures relative economic strength.


For the counties covered by the NYS Comptroller, we plot the DIVER Geo Score on the X-axis and the Fiscal Score on the Y-axis (inverted scale).

The DIVER Geo Score represents a relative score of the economic health of a U.S. State, county or city. Based on a scale of 0-10, with 10 being the best, this data is updated monthly and is calculated from multiple economic and demographic factors related to three primary data categories—employment, income and housing.

While most of New York’s counties show the correlation between economic strength and fiscal health we would expect, some of its economically strongest counties have the highest levels of fiscal stress.  Rockland, Suffolk, Westchester and Nassau all have very strong economies, but weak fiscal scores.

Westchester (43%->53%) and Nassau (63%->73%) are notable because their fiscal scores have actually gotten worse since the last observation.  As we noted the last time we looked at these scores, Nassau demonstrates “how to turn a strong economy into a mediocre credit.”

Albany County has an above average economy, but its level of fiscal stress is above average for New York State.

The economy of Albany City is slightly below average (Geo Score = 4.6), but its Fiscal Score has shown steady deterioration (35%->40%-> 68%).

After MCDC Induced Spike, Volume of Disclosure Filings Return to Normal

The number of 15c2-12 filings made during September ‘15 is on track to decrease by over 30% relative to the number of filings made during September ’14.  We believe this reflects the end of borrowers doing “make-up” filings in response to the SEC’s MCDC initiative.  The tally for September ’15 is 4% higher than September ’14 (pre-MCDC).


The largest contributor to the MCDC spike and the recent declines is the “Audited Financial Statement or CAFR” category. Looking at the monthly change in number of filings vs. previous year illustrates the dramatic MCDC spike and the subsequent drop-off.


With the continuing debate regarding the costs and benefits of the MCDC initiative, we will continue to monitor this for signs that MCDC made lasting changes in issuer behavior.

Is the Puerto Rico Economy Finished Shrinking?

According to the most recent release of the Puerto Rico Economic Activity Index by the GDB, August was the first month since December ’12 that the Puerto Rico economy was not smaller versus the prior year.


As we have pointed out before, while this is good news, Puerto Rico needs robust growth to make up for the slide in its economy over the last ten years.


Map of the Week:  Change in Philly Fed Coincident Index


Have a great week,

Michael Craft, CFA