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MOODY'S ASSIGNS Aa1 RATING TO TOMPKINS COUNTY'S (NY) $17.99 MILLION PUBLIC IMPROVEMENT (SERIAL) BONDS, 2010 AND MIG 1 RATING TO THE COUNTY'S $2.4 MILLION BOND ANTICIPATION NOTES, SERIES 2010 (RENEWALS); OUTLOOK REVISED TO STABLE

18 Nov 2010

Aa1 RATING AFFECTS $48.6 MILLION IN OUTSTANDING PARITY DEBT

County
NY

Moody's Rating

ISSUE

RATING

Public Improvement (Serial) Bonds, 2010

Aa1

  Sale Amount

$17,990,000

  Expected Sale Date

11/30/10

  Rating Description

General Obligation

 

Bond Anticipation Notes, 2010 (Renewals)

MIG 1

  Sale Amount

$2,415,000

  Expected Sale Date

11/30/10

  Rating Description

Bond Anticipation Notes

 

Opinion

NEW YORK, Nov 18, 2010 -- Moody's Investors Service has assigned a Aa1 rating to Tompkins County's (NY) $17.99 million Public Improvement (Serial) Bonds, 2010 and a MIG 1 rating to the county's $2.4 million Bond Anticipation Notes, Series 2010 (Renewals). The county's outlook has been revised to stable from negative. The bonds and notes are secured by the county's unlimited ad-valorem tax pledge. Concurrently, Moody's has affirmed the Aa1 long-term rating on $28.2 million of previously issued parity debt. Proceeds of the bonds will retire a like amount of previously issued bond anticipation notes (BANs) which were originally issued for various capital improvement projects including bridge and road reconstruction and office building construction. Approximately $17.2 million of the notes being retired mature on December 17, 2010 and $2.1 million of notes that mature January 14, 2011. The 2010 note proceeds will be used to renew BANs that mature on December 17, 2010 and were originally issued for road and highway reconstruction.

RATINGS RATIONALE

The Aa1 rating reflects the county's stable tax base with a sizable tax-exempt component anchored by two large higher education institutions, a historically stable and adequate financial position, and an average debt burden.

The stable outlook reflects Moody's expectation that the county's financial position may narrow slightly in the near-term but will remain relatively stable due to management's commitment to maintaining financial flexibility at currently adequate levels despite ongoing revenue weakness and growing expenditure pressures. Like many other New York counties, Tompkins faces expenditure pressures including significant projected increases to pension contributions over the next several years. Should sales tax performance weaken or new revenue proposals fail to be approved (proposed mortgage tax increase requires state legislative approval), the county's creditworthiness may be impacted.

DEMONSTRATED MARKET ACCESS

The MIG 1 rating incorporates the county's long-term credit characteristics and history of market access. The county typically receives approximately six bids on its competitive offerings, and received 6 bids on each of the BANs sales that occurred in February of 2010, 2009 and 2008 and five bids in the December 2009 sale, and three bids in January of 2009. Given this history, Moody's expects the county will be able to refinance the current notes at the December 15, 2011.

FINANCIAL POSITION EXPECTED TO TIGHTEN IN 2010

Moody's believes that the county's currently adequate financial flexibility will be maintained despite operating deficits in the last two fiscal years and a third operating loss projected for 2010, given the stabilization of economically sensitive revenues and management's prudent budgeting including conservative revenue projections and reduced reliance on reserve appropriation. The county's rating balances the stable local economy against a historically adequate financial position, with reserves equal to approximately 15.36% of revenues over the past five years (adjusted for sales tax revenues passed through to underlying municipalities), providing moderate cushion against the county's reliance on economically volatile sales tax revenues, which comprised approximately 24% of adjusted revenue in fiscal 2009. Fiscal 2008 ended with a $1.1 million operating deficit reflecting the inability to fully replenish a budgeted $4.8 million appropriation of fund balance. Despite a budget appropriation of $3.4 million in fiscal 2009 and a sales tax shortfall (approximately $1 million), management was able to replenish the majority of the original appropriation due in large part to federal stimulus funding via an increase to the Federal Medical Assistance Percentage (FMAP); and personnel related costs ($1.4 million) and public safety ($770,000) savings. Fiscal 2009 ending General Fund balance was adequate at$16.9 million, or 13.8% of General Fund revenues (net of sales tax pass through).

The fiscal 2010 budget included a further reduced $2.9 million fund balance appropriation and currently management projects utilization of approximately $500,000. The budget included a 3.7% sales taxes decline (budget to prior year budget) and management anticipates meeting this target at a minimum. In addition, the county received an unanticipated Medicaid payment of approximately $625,000 from New York state (rated Aa2/stable outlook) due to a previous county overpayment. Officials have recently approved the fiscal 2011 budget which included a smaller $1.2 million appropriation of fund balance and $780,000 of non-recurring federal stimulus funds to balance the budget. In addition, the county increased the property tax levy by approximately 5% ($2.29 million) helping to limit the county's reliance on non-recurring revenues. Although management anticipates authorization from New York State (G.O. rated Aa2/stable) to levy a mortgage tax, which would provide a new recurring revenue (estimated to generate $900,000 annually); and possible further expenditure reductions for the fiscal 2012 budget, Moody's believes that the county's financial position may narrow further over the near term should the mortgage tax proposals fail to be approved by the state or sales tax revenue continue to under-perform. Future rating reviews will hinge on the county's ability to restore and maintain structurally balanced operations and increase reserves in step with budgetary growth.

AVERAGE DEBT BURDEN EXPECTED TO INCREASE

The county's direct debt burden is average at 0.9% of full valuation. On an overlapping basis, the county's 3.7% debt burden is slightly above average for New York counties (median is 2.9%) and falls considerably to 2.2% when underlying school district debt is offset by state school building aid. Amortization of principal is rapid with 69.9% of principal retired within ten years. The county does not have additional debt issuance plans over the medium-term, outside of retiring the current BANS with long-term debt, as a majority of the county's capital needs were addressed through the recent capital plan. The county has no variable rate debt outstanding and is not party to any swap agreements.

STABLE TAX BASE WITH A SIZABLE TAX EXEMPT COMPONENT

Moody's expects moderate expansion in the county's $6.3 billion tax base given ongoing development and modest population expansion (4.8% over the last decade - 2008 estimate). Tompkins County benefits from a stable economy anchored by Cornell University (rated Aa1/negative outlook) and Ithaca College (rated A2/negative outlook) with a combined student population of more than 20,000. While this strong institutional presence provides stability to the economy, as indicated by county unemployment rates that are consistently below those for the state (6.1% as of August 2010 compared with 8.2% for the state), it also depresses full valuation as 40% of the county's tax base is tax-exempt. Additionally, income levels are below average (2000 per capita income equal to 84% of that for the state) reflecting the sizeable student presence. Cornell is the county's largest employer and taken together the two universities have more than 11,000 employees.

KEY STATISTICS:

2008 Population (est.): 101,136

2010 Full Value: $6.3 Billion

Full Value Per Capita: $62,044

Overall Debt Burden: 3.7% (2.2% when adjusted primarily for state building aid)

Principal Payout: 69.9% within ten years

2009 General Fund balance: $16.99 million (12.3% of General Fund revenues)

Median Family Income: 103% of state average

Per Capita Income: 84% of state average

Post-Sale Parity Debt Outstanding: $51 million

What Could Change the Rating (remove negative outlook) - UP

- Significant improvement of available reserves

-Growth and diversification of tax base

What Could Change the Rating - DOWN

- Employment and tax base deterioration resulting in negative operational impact

-Continuation of structurally imbalanced or deficit operations

- Increasing reliance on non-recurring revenues in the fiscal 2012 budget

The principal methodologies used in this rating were General Obligation Bonds Issued by U.S. Local Governments published in October 2009, and Bond Anticipation Notes and Other Short-Term Capital Financings published in May 2007.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service 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

Jessica A. Tevebaugh
Analyst
Public Finance Group
Moody's Investors Service

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

Lisa Cole
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 Aa1 RATING TO TOMPKINS COUNTY'S (NY) $17.99 MILLION PUBLIC IMPROVEMENT (SERIAL) BONDS, 2010 AND MIG 1 RATING TO THE COUNTY'S $2.4 MILLION BOND ANTICIPATION NOTES, SERIES 2010 (RENEWALS); OUTLOOK REVISED TO STABLE
No Related Data.
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