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New Issue:

MOODY'S ASSIGNS Aa1 RATING TO TOWN OF SMITHTOWN'S (NY) $2.28 MILLION G.O. PUBLIC IMPROVEMENT SERIAL BONDS OF 2011

15 Apr 2011

AFFIRMATION OF RATING AFFECTS APPROXIMATELY $17 MILLION OF OUTSTANDING G.O. DEBT, POST ISSUANCE

Municipality
NY

Moody's Rating

ISSUE

RATING

Public Improvement Serial Bonds - 2011

Aa1

  Sale Amount

$2,275,000

  Expected Sale Date

04/20/11

  Rating Description

GO, ULT

 

Opinion

NEW YORK, Apr 15, 2011 -- Moody's Investors Service has assigned a Aa1 rating to the Town of Smithtown's (NY) $2.28 million Public Improvement Serial bonds of 2011. Concurrently, Moody's has affirmed the Aa1 rating on the town's $14.8 million in previously issued outstanding parity rated debt.

SUMMARY RATINGS RATIONALE

The bonds are secured by the town's unlimited general obligation tax pledge. The town's high-quality Aa1 rating factors a sizable and mature tax base with above-average wealth indicators, low debt burden, and a healthy financial position. Bond proceeds will fund a number of small projects, including a fire training simulator, a street sweeper and a methane recovery system.

STRENGHTHS

Healthy financial operations with sound reserves

Sizable tax base has shown relative stability

during the economic downturn

CHALLENGES

Potential financial impact of open labor contracts

DETAILED CREDIT DISCUSSION

HEALTHY FINANCIAL OPERATIONS WITH SOUND RESERVE LEVELS EXPECTED TO BE MAINTAINED

Moody's expects the town's financial position will remain healthy given conservative budgeting practices and management's demonstrated commitment to maintaining ample reserve levels. The town's reserves have nearly doubled over the past four years, with General Fund balance increasing to $17.4 million, or a healthy 41.7% of General Fund revenues, in fiscal 2009, from $9.5 million, or a strong 22% of General Fund revenues, in fiscal 2005. The surpluses, which averaged $1.6 million from fiscal 2005 to fiscal 2009, were primarily due to conservative expenditure budgeting. Unaudited fiscal 2010 results show another operating surplus of almost one million dollars, again due to conservative budgeting practices.

The town's fund balance remains liquid (net cash stood at a sound 38.4% of revenues in fiscal 2009), and the town maintains the majority of its General Fund balance as undesignated ($17.2 million, or 41.3% of revenues). The Highway Fund, the town's other major property tax-supported fund, has seen some increase in reserve levels over the last several years; unaudited figures for fiscal 2010 show another operating surplus. At fiscal 2009 year end, the Highway Fund balance was $3.3 million, or 15.9% of Highway Fund revenues. The unaudited balance for fiscal 2010 shows an increase of $337,000. Combined General and Highway Fund balances at fiscal 2009 year end was $20.7 million, or 33.1% of revenues.

The fiscal 2010 General Fund unaudited expenditures and transfers declined 4.4% from fiscal 2009 levels, reflecting a general tightening of expenditure controls and decreased transfers to the Capital Projects Fund. Property taxes comprise the majority (67.8%) of the town's 2009 Town and Highway Fund revenues, adding a degree of predictability to the town's financial profile. State aid is the town's second largest revenue source at 9.8% of 2009 receipts and represents an area of possible vulnerability in light of ongoing state budget pressures. Future rating actions will factor the town's ability to maintain structurally balanced operations and sound reserve levels consistent with budgetary growth.

SIZABLE AND MATURE LONG ISLAND TAX BASE WITH PROXIMITY TO NEW YORK CITY

The town's $19 billion tax base, while primarily residential, also contains a mix of industrial and commercial properties which officials believe are a stabilizing force on taxable values. Assessed valuation declined 1.3% and 0.8% in years 2010 and 2011, respectively, reflecting limited new development as well as successful tax appeals. Over the past five years, assessed valuation declined at an average rate of 0.4% annually, given limited new development opportunities and successful tax appeals. The town is located in Suffolk County (G.O. rated Aa2/stable), approximately 45 miles east of New York City, and is expected to continue to benefit from this location in the long term. Wealth levels are above average, with per capita income equal to 134.4% and 145.5% of state and national medians, respectively. Full value per capita is healthy at $153,956.

LOW DEBT BURDEN EXPECTED TO REMAIN MANAGEABLE

Moody's expects the town's low direct debt burden (0.1% of full value) will remain manageable in the medium term given a rapid rate of principal amortization (88% repaid within ten years). The town's overlapping debt burden increases to a relatively higher 1.4% when the town's pro rata share of overlapping county and municipal debt obligations are incorporated. Debt for the long-term solid waste contractual obligation with the Town of Huntington (G.O. rated Aaa) is funded through the Refuse and Garbage Fund whose revenues are a flat household fee paid with resident's tax bills. Adding in the town's share of this debt raises debt burden to 1.6%. Debt service expenditures comprised a reasonable 5.1% of fiscal 2009 Town and Highway Fund expenditures. All outstanding debt is fixed rate and the town has no exposure to derivative instruments.

WHAT COULD MAKE THE RATING GO UP

Development of comprehensive financial forecasting plans

Property tax base growth

WHAT COULD MAKE THE RATING GO DOWN

Substantial reduction in operating reserves

KEY INDICATORS:

2000 Population: 115,715

2008 Population (estimate): 121,162

2010 Full valuation: $19 billion

2010 Full value per capita: $153,956

Direct debt burden: 0.1%

Overall debt burden: 1.3%

Payout of principal (10 years): 88.2%

Fiscal 2009 General Fund balance: $17.4 million (41.7% of General Fund revenues)

Fiscal 2009 Town and Highway Fund balance, combined: $20.7 million (33.1% of revenues)

1999 Per capita income: $31,401 (134.3% of the state and 145.5% of the US)

1999 Median family income: $87,335 (169% of the state and 174.5% of the US)

Post-sale parity debt outstanding: $17 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

Patricia McGuigan
Analyst
Public Finance Group
Moody's Investors Service

Robert Weber
Backup Analyst
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 TOWN OF SMITHTOWN'S (NY) $2.28 MILLION G.O. PUBLIC IMPROVEMENT SERIAL BONDS OF 2011
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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