Moody's affirms Baa3 rating to Town of Fishkill's (NY) $5.9 million G.O. bonds outstanding; outlook remains negative

Actual Moody's Announcement

Global Credit Research - 19 Dec 2012

New York, December 19, 2012 -- Moody's Investors Service has affirmed a Baa3 rating on the Town of Fishkill's (NY) $5.9 million G.O. bonds outstanding; outlook remains negative. The bonds are secured by the town's general obligation pledge as limited by the Property Tax Cap -- Legislation (Chapter 97 (Part A) of the Laws of the State of New York, 2011).

SUMMARY RATING RATIONALE

The Baa3 rating factors the town's severely distressed financial position with multiple years of operating deficits which has led to large negative fund balances in the majority of the town's operating funds. The rating also reflects the town's moderately sized tax base with average wealth levels, a modest debt burden with limited near-term borrowing plans, and recently missed debt service payments.

The negative outlook reflects the continued operating deficits as of fiscal 2011 and the challenges the town will face in returning to structural balance across all funds. Additionally, the town's net cash position remains weak and management will continue to require the support of local banks to purchase the town's annual cash flow borrowings. To these points, new management has proposed a multi-year deficit reduction plan with approved tax rate increases in fiscal 2013 which is projected to improve the financial position.

Effective January 1, 2012, all local governments in New York State are 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, debt has not been exempted for all other local governments. Moody's believes that the risks associated with the property tax cap remain unchanged and we do not foresee making a rating distinction between debt not subject to the cap. For more information regarding the property tax cap please reference the Special Comment "New York Local Governments' Debt Under New Property Tax Cap to Be Rated the Same as Unlimited Tax General Obligation Debt" released May 14, 2012.

STRENGTHS

- Solid tax base with average wealth levels

CHALLENGES

- History of missed debt service payments

- Severely distressed financial position

- Liquidity position relies on cash flow note borrowing

WHAT COULD MAKE THE RATING GO UP (REMOVAL OF NEGATIVE OUTLOOK)

- Cash flows reflect continued improvement in net cash including the reduction in TAN issuance

- Audited financials reflect an improved fund balance position

- Demonstrated ability and willingness to make debt service payments on time and in full

WHAT COULD MAKE THE RATING GO DOWN

- Fiscal 2013 cash flows are worse than projected

- Audited fiscal 2012 financials reflect an increasing fund balance deficit

- Inability to implement plan to reduce deficit fund balances over five years

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 certain 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 certain 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 certain 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.

Please see the credit ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

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Nicholas Lehman
Analyst
Public Finance Group
Moody's Investors Service, Inc.
60 State Street
Suite 700
Boston, MA 02109
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Weber
Asst Vice President - Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

http://www.moodys.com/research/MOODYS-AFFIRMS-Baa3-RATING-TO-TOWN-OF-FISHKILLS-NY-65--PR_235253