Moody's Investors Service said it has downgraded to A1 from Aa3 the underlying rating on the town of Lloyd, N.Y.'s $1.5 million of outstanding general obligation debt.

The bonds are secured by the town's general obligation pledge as limited by the Property Tax Cap-Legislation (Chapter 97 (Part A) of the Laws of the State of New York, 2011).

The downgrade reflects the town's financial position, which has deteriorated a significant amount during the period between fiscal 2008 and 2011.

The rating also factors in the town's tax base that has experienced recent declines as the result of a weakening in the housing market. Also reflected in the rating is the town's manageable debt burden, along with its above-average socio-economic indicators.

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 believes that the risks associated with the property tax cap remain unchanged and it does not foresee making a rating distinction between debt subject and not subject to the cap.

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