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.

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