NEW YORK - Moody's Investors Service said it has assigned an A1 rating with a stable outlook to the city of Buffalo, N.Y.'s $22 million general improvement serial bonds, 2012A, $5 million school serial bonds, 2012B and $19.5 million general obligation refunding bonds, 2012C.

Concurrently, Moody's has upgraded the city's general obligation rating to A1 from A2 and revised the outlook to stable, affecting $238 million of previously issued parity debt secured by the city's general obligation pledge as limited by the Property Tax Cap Act (Chapter 97 (Part A) of the Laws of the State of New York, 2011.

The upgrade to A1 reflects significant improvement of the city's financial operations and liquidity following augmentation of reserves in each of the last eight years and a trend of structurally balanced operations, despite near-term declines.

The rating also factors: (1) challenges posed by the city's poor demographic profile; (2) a high debt burden that is expected to gradually moderate; (3) the oversight of city operations by the Buffalo Fiscal Stability Authority (BFSA, sales tax and state aid secured bonds rated Aa1), which has approved the city's four-year financial plan; (4) the city's improved revenue raising flexibility given modest growth in assessed valuation and improved taxing margin; and (5) additional bondholder security provided by the city's legally required and trustee-held bi-annual set-aside of debt service payments from first property taxes collected.

The stable outlook reflects Moody's belief that the city's liquidity and reserve position will remain adequate, evidenced by elimination of the need for seasonal cash flow borrowing in the last five fiscal years.

The currently healthy cash position is expected to provide satisfactory cushion against near-term fund balance and liquidity declines.

Proceeds of the Series 2012A and B Bonds will provide funds for various construction projects in the city and at the school district.

Proceeds of the Series 2012C Bonds will refund the Series 1998C Bonds and Series 2001C Bonds with an estimated net present value savings of 8.8% and no extension of maturity.

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