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New Issue:

MOODY'S ASSIGNS MIG1 RATING ON TOMPKINS COUNTY'S (NY) $3.3 MILLION G.O. BOND ANTICIPATION NOTES

29 Jul 2011

AFFIRMS Aa1 RATING ON $45.8 MILLION OF OUTSTANDING G.O. DEBT; OUTLOOK STABLE

County
NY

Moody's Rating

ISSUE

RATING

Bond Anticipation Notes 2011

MIG 1

  Sale Amount

$3,250,000

  Expected Sale Date

07/28/11

  Rating Description

Bond Anticipation Notes

 

Opinion

NEW YORK, Jul 29, 2011 -- Moody's Investors Service has assigned a MIG 1 rating to Tompkins County's (NY) $3.3 million General Obligation Bond Anticipation Notes, Series 2011. The notes are secured by the county's unlimited ad-valorem tax pledge. Concurrently, Moody's has affirmed the Aa1 long-term rating on $45.8 million of previously issued parity debt. The outlook remains stable. Proceeds of the note are issued in anticipation of the receipt of various state grants used to finance the county's ongoing capital projects.

SUMMARY RATING 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 will remain satisfactory 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, the county's creditworthiness could be impacted. The MIG 1 rating reflects the aforementioned underlying long-term credit characteristics with the county's demonstrated history of market access.

Effective January 1, 2012, all local governments in New York State will be subject to a property tax cap which limits levy increases to 2% or the rate of inflation, whichever is lower. While school district debt has been exempted from the cap it has not been for all other local governments. Moody's will continue to treat all general obligation debt issued in New York as an unlimited tax pledge through the end of the year. We continue to research what the impact of the new property tax cap will be on debt issued by nonschool districts after it goes into effect next year. For more information regarding the property tax cap please reference the Special Comment "New York State's Property Tax Cap will Further Pressure Local Government Finances; School District's Most Impacted" released July 5, 2011.

STRENGTHS

-Satisfactory reserves

-Stable tax base with large institutional presence

CHALLENGES

-Maintenance of the county's financial position given its high reliance on economically sensitive revenue streams

-Ability to address ongoing increases to fixed costs such as personnel, debt, and pension costs given the recent passage of the state tax cap

DETAILED CREDIT DISCUSSION

DEMONSTRATED MARKET ACCESS

The MIG 1 rating incorporates the county's long-term credit characteristics and history of market access. In its last note sale in December 2010, the county received six bids. The county typically receives approximately six bids on its competitive offerings, and received six 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 July 2012 maturity.

FINANCIAL POSITION STABILIZED IN FISCAL 2010

After two consecutive years of operating deficits, the county was able to generate a sizable $3.6 million operating surplus in fiscal 2010 due to a change in the claiming of state reimbursements for social service expenditures. Ending unreserved fund balance increased to $17.6 million or 12.3% of General Fund revenues from a prior year low of $14.3 million or 10.4% of revenues. The county's rating balances the stable local economy against a historically adequate financial position, providing moderate cushion against the county's reliance on economically volatile sales tax revenues, which comprised approximately 16% of revenues net of sales tax revenues passed through to underlying municipalities. While the county is currently in discussions to apply a portion of the fiscal 2010 surplus towards future capital projects and/or pension increases, any significant decrease in reserve levels beyond historical norms would likely heighten the effects of potential unexpected volatility in economically sensitive revenue streams to the county's financial condition.

The fiscal 2011 budget 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. Midway through their fiscal year, county officials expect operations to be balanced with its contingency reserve absorbing an $800,000 unanticipated shortfall in state aid. Importantly, the county was able to make up for the failure of their mortgage tax proposal to replace the loss of non-recurring federal stimulus funds through additional expenditure controls and conservative sales tax assumptions. Reflective of the volatile revenue environment the new state tax cap, county officials anticipate further expenditure reductions for the fiscal 2012 budget. Moody's believes that the county's ability to conservatively budget for economically sales tax revenues combined with their ability to manage raising personnel and benefit costs either within the tax limitation to be a key rating driver.

STABLE TAX BASE WITH A SIZABLE TAX EXEMPT COMPONENT

Moody's expects the county's $6.3 billion tax base to remain stable over the near term. 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 (5.4% as of May 2011 compared with 7.8% 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.

AVERAGE DEBT BURDEN EXPECTED TO INCREASE

The county's direct debt burden is average at 1% of full valuation and increases to 2.3% when including overlapping municipalities. Amortization of principal is rapid with 69.5% of principal retired within ten years. The county does not have additional debt issuance plans over the medium-term, outside of issuing bond anticipation notes to address the timing of various state grants associated with their capital projects. The county has no variable rate debt outstanding and is not party to any swap agreements.

WHAT COULD MAKE THE RATING GO UP

- Significant improvement of available reserves

-Growth and diversification of tax base

WHAT COULD MAKE THE RATING GO 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

KEY STATISTICS:

2009 Population (est.): 101,779

2011 Full Value: $6.3 Billion

Full Value Per Capita: $61,782

Net Direct Debt Burden: 1% of full value

Overall Debt Burden: 2.3% of full value

Principal Payout: 69.5% within ten years

2010 Total General Fund balance: $21 million (14.6% of General Fund revenues)

2010 Unreserved General Fund balance: $17.7 million (12.3% of General Fund revenues)

Median Family Income: 103% of state average

Per Capita Income: 84% of state average

PRINICPAL METHODOLOGY USED

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a 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

Dora Lee
Analyst
Public Finance Group
Moody's Investors Service

Jessica A. Lamendola
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, Inc.
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS MIG1 RATING ON TOMPKINS COUNTY'S (NY) $3.3 MILLION G.O. BOND ANTICIPATION NOTES
No Related Data.
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