Moody’s Keeps Eye on Cicero, N.Y., LDC Debt, Despite Council Appropriation

Investors holding bonds from the Cicero Local Development Corp.’s $15.25 million sale two years ago are not out of the woods yet, despite the town council in the upstate New York community finally intervening last week to help pay November’s defaulted debt service payment.

Moody’s Investors Service told The Bond Buyer yesterday that the debt issued to begin developing Cicero Commons remains under review for an additional downgrade. Yaffa Rattner, a Moody’s senior credit officer, said it was the rating agency’s expectation that Cicero was legally required to make up the balance of the LDC’s $513,000 debt service payment due Nov. 3.

“The question in terms of the final rating level is what is the likely recovery over the life of the debt — which extends 40 years — should Cicero in the future fail to appropriate,” Rattner said. “Should Cicero fail to appropriate and should the facility continue to lose money, there will be insufficient funds for the next debt service payments.”

The Cicero LDC sold $15.25 million in revenue bonds two years ago for the Cicero Commons Recreation Facilities Project, helping to finance the construction of a $16.5 million center that includes two skating rinks and a YMCA on the 140-acre commons.

In addition to the general obligation of the CLDC and an underlying mortgage, Cicero signed a 41-year lease with the local development corporation to back the debt. The $16.5 million center has not generated enough revenues to cover debt service and has failed to spur new developments on the commons. As a result, the trustee, Bank of New York, drew down reserves to make debt service payments.

In November, the LDC owed bondholders $513,000 and had only $236,000 in reserves. While the town council had a line item in its 2003 budget for the commons, until last week it refused to appropriate money to help pay the debt service. Last week it appropriated $246,929.52.

According to the Syracuse Post-Standard, the town council has not included any appropriations for the commons in its $7.71 million 2004 budget. Town officials could not be reached for comment.

In August, after the Bank of New York notified bondholders that CLDC was in technical default as a result of the reserves draw-down to make debt service payments, Moody’s put the corporation’s and the town’s credit ratings under review for a downgrade.

Since September, Moody’s has downgraded the CLDC three times, with the credit falling into junk status from investment grade — all the way to Caa1 from its original Baa2 rating. The credit remains on a watch list. The town has been downgraded twice to below investment grade — to Ba2 from A3. It is off Moody’s watch list.