Moody’s Investors Service has changed the ratings and/or outlooks of 181 New York localities participating in the New York State Section 99-B Intercept Program.
Moody’s made the changes Tuesday in conjunction with the release of a new methodology for state aid intercept programs, which enhance the safety of local bonds. The ratings agency upgraded two bonds issued by two localities and downgraded 21 bonds issued by seven localities.
Moody’s downgraded Wyandanch Union Free School District’s bonds to Baa3 with no outlook from A2 with an uncertain outlook. It downgraded seven bonds from Yonkers to A3 with a stable outlook from A2 with an uncertain outlook.
In addition, Moody’s downgraded Utica City School District to Baa1/negative from A2/uncertain; Ripley Central School District 1, Scio Central School District, and Whitesville Central School District to A3/no outlook from A2/uncertain; and Jasper-Troupsburg Central School District to A2/no outlook from A1/uncertain.
Moody’s upgraded the Niagara-Wheatfield Central School District to A1/negative from A2/uncertain and the Pine Valley Central School District to A1/no outlook from A2/uncertain.
In the new methodology Moody’s starts with the issuer’s credit quality and then examines the impact of the aid intercept program.
For strengths of New York’s 99-B program, Moody’s associate analyst Pamella Wong and vice president Orlie Prince wrote that the intercept can be implemented for several years and most school districts receive ample annual state aid compared to their annual debt service obligations.
As for challenges, Wong and Prince noted that state aid cannot be accelerated and the state has a history of deferring aid in times of fiscal stress.
“Generally, the methodology scorecard indicates a one-notch uplift above the underlying rating for intercept participants, however this is constrained on a case-by-case basis by the 'state rating cap’ rating which caps these enhanced ratings at A1, two notches below the state’s GO (Aa2/stable),” Wong and Prince wrote.
