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Related Research
Rating Action:
Moody's assigns A2 to Nassau County, NY's $33M GO Bonds 2015A; outlook is stable
Global Credit Research - 12 Jan 2015
New York, January 12, 2015 --
Moody's Rating
Issue: General Improvement Bonds, 2015 Series A; Rating: A2; Sale Amount: $33,000,000; Expected Sale Date: 1/15/2015; Rating Description: General Obligation
Opinion
Moody's Investors Service has assigned an A2 rating to Nassau County's $33 million General Improvement Bonds, 2015 Series A. Moody's currently maintains an A2 rating on all outstanding general obligation debt and a Baa1 rating on the county's Regional Off-Track Betting Corporation's (NROTB) Revenue Bonds. The outlook on all of the county's debt is stable. The general obligation pledge is limited by the Property Tax Cap - Legislation (Chapter 97 (Part A) of the Laws of the State of New York, 2011). The bonds will be finance various capital projects and judgments and settlements. The Nassau County Interim Finance Authority (NIFA, sales tax revenue bonds rated Aa1 stable) has not provided authorization for the issuance of debt but is expected to at its next meeting.
SUMMARY RATINGS RATIONALE
The A2 rating reflects the county's large and wealthy tax base, manageable debt position, and financial oversight provided by NIFA, which moved to a hard control board on January 26, 2011. Offsetting these factors are the county's constrained liquidity position and operating reserves, increasing budgetary pressures, and exposure to variable rate debt and interest rate swaps.
The stable outlook reflects the expectation that the county will maintain its financial and liquidity position, including the implementation a recent labor settlement that includes annual wage increases through 2017.
The NROTB special obligation bonds are secured by payments made directly to the Trustee by Nassau County pursuant to a Support Agreement, which are subject to annual appropriation. The Baa1 rating reflects this appropriation risk and the lack of essentiality of the financed asset.
STRENGTHS
-Large and diverse tax base which benefits from proximity to New York City (rated Aa2 stable)
-Strong socioeconomic profile with above average personal wealth and income levels
-Oversight provided by the Nassau County Interim Finance Authority (NIFA)
CHALLENGES
- Negative net cash and investments, limited financial reserves and a trend of structurally imbalanced operations
- Dependence on economically sensitive sales tax revenues
- Exposure to NIFA and NHCC's variable rate debt and swap portfolio, as well as dependence on market access for substantial cash flow borrowing
Outlook
The stable outlook reflects the expectations that the county's reserve position and liquidity will stabilize or improve. We expect the county to reduce its reliance on debt for operating purposes and continue to reduce the amount of cash flow notes issued annually. We also expect NIFA to continue to monitor the county's financial position and take action if the county's budget becomes structurally imbalanced. Continued declines in sales tax revenues without a viable plan to offset the lost revenue will likely put pressure on the county's rating.
WHAT COULD MAKE THE RATING GO UP
- Structurally balanced budgets that do not require the issuance of debt
- Significant improvements to reserves and liquidity
- Continued reduction of cash flow notes to support operations
WHAT COULD MAKE THE RATING GO DOWN
-Weak revenue performance, especially in sales tax
- Failure to implement structural budget adjustments to offset the loss of speed camera revenue
-Increasing reliance on cash flow borrowing from county's current expectations
-Reliance on highly speculative gap-closing measures in multi-year budget plan
The principal methodology used in this rating was US Local Government General Obligation Debt published in January 2014. 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.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Robert Weber
Vice President - Senior Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Malcolm Thompson
VP - Senior Credit Officer
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
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