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Nassau County, N.Y., to Sell $260M of Tans

Long Island, N.Y.’s Nassau County is planning to issue $260 million of tax anticipation notes in three series on Thursday.

The notes will be priced by JPMorgan. Orrick, Herrington & Sutcliffe LLP is bond counsel.

The county historically issues Tans each year in early December, according to Brian Nevin, a county spokesman.

The proceeds will provide liquidity during low cash periods in anticipation of real property tax collections for the fiscal year beginning Jan. 1, 2013.

Substantially all of the property tax collections will be received by Sept. 30, 2013.

About $20 million of the proceeds are expected to provide additional liquidity for a portion of the costs associated with damage from Hurricane Sandy. The county will likely repay the notes with federal and state reimbursements.

Each series of notes will have maturities in 2013, with $20 million maturing on April 1, $170 million maturing on Sept. 30, and $70 million maturing on Oct. 31.

Last December the county issued $230 million of Tans with yields ranging from 1.1% to 1.15%. This year’s increased amount is due to the hurricane-related costs.

Fitch Ratings had assigned the 2011 notes an F1-plus rating, but for this year’s Tans, the agency has lowered its short-term rating to F1.

The agency cited the county’s limited financial flexibility, tax refund liability, and reliance on short-term borrowing as some of the key rating drivers.

“The county’s lack of financial flexibility is evidenced by high dependence on economically sensitive sales tax revenue, consistent use of non-recurring measures to close budget gaps, depletion of reserves, and long-term labor contracts,” analysts said.

Fitch also cited the county’s moderate debt burden, sound cash flow coverage, and financial oversight from the Nassau County Interim Finance Authority as strengths.

NIFA moved to a hard control board on Jan. 26, 2011, and has the ability to approve or deny the county’s borrowings. Fitch views the decision-making as somewhat more cumbersome than in prior periods, but believes the oversight has benefits.

Standard & Poor’s kept its top short-term rating of SP1-plus on the new notes, citing the county’s general obligation pledge, strong coverage, and adequate note structure.

Projected property tax receipts for 2013 total $804.8 million. The Tans represent 32% of total projected real property tax receipts and 10% of total cash receipts.

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