Moody's Investors Service has downgraded Suffolk County's (NY) General Obligation Bond rating to A1 from Aa2; the outlook is negative. The county's general obligation debt is secured by the county'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 downgrade and negative outlook reflects sharply narrowed liquidity after recurring operating deficits have significantly reduced reserve levels. The county continues to face a structural operating gap in the current fiscal year, necessitating significant midyear budget adjustments. The county benefits from a sizeable and diverse tax base and a manageable debt position.
Effective January 1, 2012, all local governments in New York State are subject to a property tax cap which limits levy increases to 2% or the rate of inflation, whichever is lower. While school district debt has been exempted from the cap, debt has not been exempted for all other local governments. Moody's will continue to treat all general obligation debt issued in New York as an unlimited tax pledge through the end of the year. We continue to research the impact of the new property tax cap on debt issued by nonschool districts as it goes into effect this year. For more information regarding the property tax cap please reference the Special Comment "New York State's Property Tax Cap will Further Pressure Local Government Finances; School Districts Most Impacted" released July 5, 2011.