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MOODY'S ASSIGNS A Aa3 RATING TO THE VILLAGE OF HARRISON'S (NY) $10.7 MILLION PUBLIC IMPROVEMENT (SERIAL) BONDS, 2011

03 Mar 2011

Aa3 RATING AFFECTS $62.1 MILLION OF PARITY DEBT, INCLUDING THE CURRENT ISSUE

Municipality
NY

Moody's Rating

ISSUE

RATING

Public Improvement (Serial) Bonds, 2011

Aa3

  Sale Amount

$10,696,070

  Expected Sale Date

03/08/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Mar 3, 2011 -- Moody's Investors Service has assigned a Aa3 rating to the Village of Harrison's $10.7 million Public Improvement (Serial) Bonds, 2011. The bonds are secured by the village's unlimited property tax pledge. Proceeds from the bonds will finance $2.5 million of new projects as well as permanently finance $8.2 million of currently outstanding BANs. Concurrently, Moody's has affirmed the Aa3 rating on the village's $62.1 million in outstanding general obligation debt.

SUMMARY RATING RATIONALE

The Aa3 rating incorporates the village's deficit financial position, sizeable and affluent residential and commercial tax base, and a modest debt burden that is expected to remain manageable.

STRENGTHS

-Large tax base

-Wealth levels higher than average

-Strong cash position

CHALLENGES

-History of structurally imbalanced financial operations

-Aggressive budgeting of declining revenue sources

-Recent history of significant tax appeals, leading to decreases in full value

DETAILED CREDIT DISCUSSION

DEFICIT FINANCIAL POSITION EXPECTED TO IMPROVE OVER THE NEAR TERM

Harrison's significant deficit financial position is expected to show signs of improvement as the village implements various expenditure controls and revenue enhancements in an effort to improve General Fund balance to positive levels. The village's financial flexibility has deteriorated substantially following eight consecutive operating deficits (fiscal 2002 through 2009), which has driven General Fund reserves to a negative $3.8 million (-9.4% of revenues) in fiscal 2009 from a recent high of $7.7 million (27% of revenues) in fiscal 2001. On an Operating Fund basis (which includes the General Fund, Highway Fund, Special Districts Fund, Library Fund and the Debt Service Fund) the reserves have declined to a low of negative $4.4 million or negative 8.4% of revenues in fiscal 2009. Fiscal 2009's operating deficit of $5.7 million was driven by revenue shortfalls, especially in economically sensitive mortgage tax, sales tax, and building permits. Although the village has an adequate liquidity position overall, with $5.8 million or 11.1% of operating revenues in cash at the end of fiscal 2009, the town's General Fund has been carrying a negative balance, requiring cash subsidies from the village General Fund to avoid the reporting of negative cash values at year end. To combat the consecutive operational declines the village board approved a 13% property tax increase in 2010 and eliminated approximately 52 positions since fiscal 2008, which reduced salary expenditures by over $4 million annually. Although audited financial statements are not yet available, management expects fiscal 2010 to have generated an operating surplus of $2.8 million, decreasing the General Fund deficit to $960,000. The fiscal 2010 surplus was reportedly attributed to more conservative budgeting of revenues, expecting to be $700,000 over budget, and expenditures, forecasted to be under budget by $2.3 million. The fiscal 2011 budget includes a 5.4%, or $1.3 million, property tax increase, a slight increase in sales tax revenues and declines in mortgage tax and building permits revenues. According to management's projections, fiscal 2011 is expected to produce a surplus of $1 million as a result of various expenditure savings and sales tax revenues that are tracking $50,000 ahead of budget year to date. Furthermore, the village has an eight parcel block of land which is currently for sale. Although there are no buyers at this time, the land is currently valued at $2.6 million and its liquidation would significantly increase financial reserves. Management's more conservative approach to budgeting revenues at lower levels is noted; however, the continuation of structurally imbalanced budgets or operating declines will put further negative pressure on the village's credit rating. The village derives the majority of its revenues from local property taxes (77.4%), adding stability to village operations.

AFFLUENT AND ESTABLISHED RESIDENTIAL COMMUNITY

Moody's believes that the village will continue to benefit from its affluent $8.7 billion tax base, given its location approximately 25 miles north of New York City (GO rated Aa2/stable) in Westchester County (GO rated Aaa/stable). The tax base includes a sizeable commercial component, including corporate headquarters for Morgan Stanley (senior unsecured rated A2/negative outlook), Mastercard (long term rated A3/stable), and PepsiCo (senior unsecured rated Aa3/stable outlook); and the headquarters facility for Nokia (long term rated A2/under review for possible downgrade). Positively, new commercial development has been planned with Pepsico planning a 140,000 square foot expansion, in addition to other notable expansions. Full valuation has slowed over the past three years with the five year average equaling 2.5% which includes a 1.9% and 8.2% reduction in values in 2009 and 2011 respectively, reflecting a decline in the overall housing market. Similarly, assessed valuation has decreased 2.1% in both 2010 and 2011 due to limited new development offset by successful tax appeals and implementation of PILOT agreements which remove commercial properties from the tax roll. Resident wealth levels have increased steadily since 1980 and, as of the 2000 census, are nearly two times state levels. High housing values and the presence of substantial commercial properties have contributed to a very high full value per capita of $325,771 in 2011.

LOW DEBT LEVELS EXPECTED TO REMAIN MANAGEABLE

Moody's anticipates that the village's debt position will remain manageable given a modest direct debt burden (0.8% of full valuation) and limited future borrowing plans. The village's overall debt burden, including all overlapping obligations, is a below-average 1.4% of full valuation. Looking ahead, management anticipates the village's level of near term debt issuance to remain manageable. Management has identified various capital improvement plans which is expected to require approximately $3 million per year over the next three years. There are no other major capital projects in the medium-term. All bonds are fixed rate and the town is not party to any derivative agreements.

WHAT COULD MAKE THE RATING GO UP:

-Significant improvement in the village's financial position

WHAT COULD MAKE THE RATING GO DOWN:

-Continued deterioration of the village's financial position

-Significant decline in tax base or the socio-economic profile

KEY STATISTICS:

2008 Population: 26,665

2011 Full Valuation: $8.687 billion

2011 Full Value Per Capita: $325,771

1999 Per Capita Income (as % of NY and US): $49,652 (212.3% and 230.0%)

1999 Median Family Income (as % of NY and US): $98,167 (189.9% and 196.2%)

2011 Direct Debt Burden: 0.8%

2009 Payout of Principal (10 years): 77.3%

FY09 General Fund Balance: -$3.8 million (-9.4% of General Fund revenues)

FY09 Unreserved, Undesignated General Fund Balance: -$5.0 million (-12.6% of General Fund revenues)

FY09 Operating Fund Balance: -$4.4 million (-8.4% of Operating Fund revenues)

FY09 Unreserved, Undesignated Operating Fund Balance: -$5.9 million (-11.4% of Operating Fund revenues)

Parity Rated Debt Outstanding: $62.1 million

PRINCIPAL METHODOLOGY

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, parties not 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

Vito Galluccio
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 Aa3 RATING TO THE VILLAGE OF HARRISON'S (NY) $10.7 MILLION PUBLIC IMPROVEMENT (SERIAL) BONDS, 2011
No Related Data.
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