NEW YORK - Moody's Investors Service said it has downgraded to A1 from Aa2 the rating on the town of Ramapo, N.Y.'s $94 million of outstanding general obligation bonds and $25 million of outstanding GO-guaranteed revenue bonds issued by the Ramapo Local Development Corporation.

Moody’s assigned a MIG 1 rating to the town's $15 million bond anticipation notes -- 2012 Series A.

The outlook remains negative.

The notes and the general obligation bonds are secured by a 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 Local Development Corporation bonds are secured by Ramapo's unconditional obligation to make payments to the trustee and, as such, the bonds carry the town's general obligation rating. Proceeds from the notes will be used to refinance the town's previously issued bond anticipation notes maturing on June 1, 2012.

The downgrade to A1 reflects significant erosion of the town's financial flexibility stemming from two consecutive years operating deficits from aggressive revenue assumptions and inability to offset mid-year shortfalls.

The rating further considers the town's sizable tax base benefiting from above-average wealth levels and average debt burden with considerable exposure to guaranteed debt for the Ramapo Local Development Corporation.

The MIG 1 reflects the aforementioned underlying long-term credit characteristics with the town's demonstrated history of market access.

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 we do not foresee making a rating distinction between debt subject and not subject to the cap.

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