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MOODY'S ASSIGNS A Aa2 RATING TO THE VILLAGE OF VALLEY STREAM'S (NY) $7.9 MILLION GO BONDS

12 Apr 2011

RATING APPLIES TO $31.1 MILLION IN G.O. DEBT OUTSTANDING, INCLUDING THE CURRENT ISSUE

Valley Stream (Village of) NY
Municipality
NY

Moody's Rating

ISSUE

RATING

Public Improvement Serial Bonds of 2011

Aa2

  Sale Amount

$4,435,000

  Expected Sale Date

04/15/11

  Rating Description

General Obligation

 

Public Improvement Refunding Serial Bonds of 2011

Aa2

  Sale Amount

$3,545,000

  Expected Sale Date

04/15/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Apr 12, 2011 -- Moody's Investors Service has assigned a Aa2 rating to the Village of Valley Stream's (NY) $4.4 million Public Improvement Serial Bonds of 2011 and $3.5 million Public Improvement Refunding Serial Bonds of 2011. The bonds are secured by the village's ad valorem tax pledge. The $3.5 million refunding bonds will refund G.O. bond series of 1997, 2001, and 2002 with estimated net present value savings of 3.87% of taken over the life of the bonds without extending the maturity dates. Concurrently, Moody's is affirming the Aa2 rating, affecting $23 million in previously issued general obligation debt.

RATING RATIONALE SUMMARY

The Aa2 rating reflects the village's conservative fiscal management, strong financial position with ample cash and reserve levels, sizeable tax base marked by ongoing tax certioraris, moderate debt burden and above average wealth levels.

STRENGTHS

-Ample cash and reserve levels

-Large, well developed tax base

CHALLENGES

-Declining assessed values due to ongoing commercial tax appeals

DETAILED CREDIT DISCUSSION

Moody's believes that the Village of Valley Stream will maintain a healthy financial position due to conservative management practices and its commitment to maintaining ample reserve levels. In fiscal 2009, the valley had a $562 operating deficit primarily driven by negative variances in mortgage tax, service fees and interest earnings revenues, resulting in a small draw on the General Fund balance. The year ended with $12.5 million in reserves (a healthy 40.4% of General Fund revenues). In fiscal 2010, the village appropriated $300K in fund balance to balance the budget but replenished $536,000 with savings from tax certs, refuse disposal fees, vacancies, and employee benefit savings. Through these proactive adjustments, the village ended fiscal 2010 with a $263,000 operating surplus, bringing the already ample General Fund balance to $12.8 million, which is 40.8% of General Fund revenues.

The fiscal 2011 adopted budget represents a 3% increase over fiscal 2010's adopted budget and included an appropriation of $464,270 in General Fund balance. Current year results indicate that the village expects to increase the draw on the General Fund balance to $583,867, primarily due to $1.4 million in tax certiorari payments, $345,500 over the budgeted $850,000. The $824,370 increase in tax appeal payments was due to prior year charges being carried over to fiscal 2010. The village will increased the tax certiorari budget line to $950,000 in fiscal 2012 and believes this expense will level off in the future. Management is planning to contract with an outside professional reassessment firm to study tax roll reassessments and its overall effects on the local economy.

In fiscal 2012, the village is expecting expenditure pressures from NYS retirement system contributions and medical benefit cost increases. To mitigate the pressure, the village has offered retirement incentives, negotiated increases in employee health benefit contributions and is reviewing implementing increases in service fees, permits and fines.

LARGE WELL-DEVELOPED TAX BASE WITH ONGOING TAX APPEALS

Valley Stream, favorably located within the Town of Hempstead in southwest Nassau County, has seen a steady increase in its property tax full valuation with five year average growth at 5.9%. Full valuation per capita, at $139,921, is above state ($55,932) and national ($89,356) averages. The village continues to benefit from its large, well developed $5 billion tax base (full valuation); however, ongoing commercial tax appeals have added to the decline in property tax assessed valuation over the past five years (five year assessed value average, -0.4%). The village continues to experience challenges to commercial property values. Retroactive tax appeal payments had decreased to $621,112 in fiscal 2010 from a peak of $1.7 million in fiscal 2007; however payments spiked back up to $1.4 million in fiscal 2011.

The village expects modest new tax base growth with a new five-story Rockaway & Sunrise Condominium and Apartment building in the early stages of construction. This development will provide retail space on the ground level and 64 residential housing units on the remaining four floors. Additionally, permits have been filed for retail expansion projects adjacent to the Green Acre Mall.

DEBT POSITION TO REMAIN MANAGEABLE

Moody's expects the village debt position to remain stable and manageable given the rapid payout of principal (88% amortized within 10 years). This gives the village the ability to increase future debt obligations at the same rate at which outstanding principal is retired, which averages $2.5 million on an annual basis. Current direct debt is 0.5% of full property tax valuation and based on the current five year Capital Improvement Plan, Moody's expects that ratio to remain level over the next five years. In order to maintain the rapid principal payout, debt service is above average at 12.6% of operating expenditures in fiscal 2010. Overall debt burden was a manageable 2.3% of full valuation and includes debt incurred by the Town of Hempstead and Nassau County. The village has no exposure to variable rate debt or derivative products.

WHAT COULD MAKE THE RATING GO UP:

-Growth in the tax base including assess property tax valuation

-Improved socio-economic indicators

WHAT COULD MAKE THE RATING GO DOWN:

-Decreased cash position and reserves

-Additional declines in the village's property tax assessment valuation

KEY INDICATORS

2010 Population estimates: 37,511 (3.1% increase from 2000)

2011 Full valuation:$5 billion

2011 full value per capita:$139,921

Per Capita income:$25,636 (109.6% of state and 118.8% of US)

Median Family Income:$72,585 (140.4% of state and 145% of US)

FY 2010 General Fund balance:$12.8 million (40.8% of general fund revenue)

Payout of principal:87.8%

Direct debt burden:0.5%

Overall debt burden:2.3%

Post-sale parity debt outstanding:$31.2 million

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009.

REGULATORY DISCLOSURES

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

Moody's Investors Service considers the quality of information available on the credit satisfactory for the purposes of assigning a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service 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 the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

Shannon McCue
Analyst
Public Finance Group
Moody's Investors Service

Robert Weber
Backup Analyst
Public Finance Group
Moody's Investors Service

Geordie Thompson
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS A Aa2 RATING TO THE VILLAGE OF VALLEY STREAM'S (NY) $7.9 MILLION GO BONDS
No Related Data.
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