Babylon, N.Y., GOs Cut to A3 by Moody's

Moody's Investors Service downgraded Babylon, N.Y.'s unlimited-tax general obligation bonds to A3 from A2.

The downgrade reflects the Long Island village's narrowed financial position, evident in a fiscal 2008 general fund balance ending at $137,000, a very modest 1.8% of general fund revenue that was down from 20.4% in fiscal 2005.

The A3 rating also reflects the expectation that Babylon's moderately sized, $1.9 billion tax base located in southwestern Suffolk County — which is rated Aa3 with a negative outlook — will likely experience further declines in assessed valuation due to the current economic environment and softening of the real estate market. However, wealth and income levels are strong.

The rating also reflects the village's average debt burden of 2.3% of full value, which Moody's expects to increase given the possibility of future debt plans for drainage improvements. Amortization of principle is rapid.

Moody's analysts believe that Babylon will be challenged to restore its financial position to previously healthy levels.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER