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Announcement:

Moody's affirms Aa2 rating on the City of Peekskill's (NY) general obligation bonds; assigns negative outlook

Global Credit Research - 19 Oct 2012

Aa2 rating and negative outlook affects $57.4 million of outstanding G.O. debt

New York, October 19, 2012 -- Moody's Investors Service has affirmed the Aa2 rating on the City of Peekskill's general obligation bonds affecting $57.4 of outstanding debt. Concurrently, Moody's has revised the outlook to negative. The bonds are secured by a General Obligation pledge as limited by the Property Tax Cap - Legislation (Chapter 97 (Part A) of the Laws of the State of New York, 2011).

SUMMARY RATING RATIONALE

The Aa2 rating reflects the city's average socioeconomic indicators, moderately sized tax-base, manageable debt burden, and conservative financial management as evidenced by a strong internal fund balance policy.

The negative outlook reflects the city's pressured finances as a result of increased health, pension, and labor costs including one-time labor expenditures, which have narrowed the city's cash reserves and fund balance. Future rating reviews will consider management's ability to address these rising costs while maintaining adequate financial flexibility in line with internal policies and long-term structural balance.

Effective January 1, 2012, all local governments in New York State are subject to a property tax cap which limits levy increases to 2% or the rate of inflation, whichever is lower. While school district debt has been exempted from the cap, debt has not been exempted for all other local governments. Moody's believes that the risks associated with the property tax cap remain unchanged and we do not foresee making a rating distinction between debt subject and not subject to the cap. For more information regarding the property tax cap please reference the Special Comment "New York Local Governments' Debt Under New Property Tax Cap to Be Rated the Same as Unlimited Tax General Obligation Debt " released May 14, 2012

STRENGTHS

- Moderately-sized tax base

- Conservative management as evidenced by a strong internal general fund balance policy

CHALLENGES

- Stabilizing financial reserves amidst 2% tax cap

- Expenditure growth resulting from increased fixed costs including pension costs

- Tax certioraris continue to diminish assessed value

OUTLOOK

The negative outlook reflects the city's pressured finances as a result of increased health, pension, and labor costs including one-time labor expenditures, which have narrowed the city's cash reserves and fund balance. Future rating reviews will consider management's ability to addressing these rising costs while maintaining adequate financial flexibility in line with internal policies and long-term structural balance.

WHAT COULD MAKE THE RATING GO UP (REMOVAL OF NEGATIVE OUTLOOK)

- Achieving consistent structural operating balance in the operating budget

- Replenishment of General Fund

WHAT COULD MAKE THE RATING GO DOWN

- Failure to achieve structural balance in the operating budget resulting in further decreases in financial position and reserve levels

- Further deterioration of reserves beyond current projects

- Ongoing tax certioraris that decrease the city's assessed valuation

RATING METHODOLOGY

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings and public information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

David Strungis
Associate Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Orlie Prince
Senior Vice President
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Aa2 rating on the City of Peekskill's (NY) general obligation bonds; assigns negative outlook
No Related Data.

 

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