AFFIRMATION OF RATING AFFECTS APPROXIMATELY $17 MILLION OF OUTSTANDING G.O. DEBT, POST ISSUANCE
Public Improvement Serial Bonds - 2011
Expected Sale Date
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.
Healthy financial operations with sound reserves
Sizable tax base has shown relative stability
during the economic downturn
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
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
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
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.
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.
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Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S ASSIGNS Aa1 RATING TO TOWN OF SMITHTOWN'S (NY) $2.28 MILLION G.O. PUBLIC IMPROVEMENT SERIAL BONDS OF 2011
Moody's Investors Service
250 Greenwich Street
New York, NY 10007