NEW YORK (S&P Global Ratings) June 6, 2017--S&P Global Ratings revised its outlook to negative from stable on Syracuse, N.Y.'s outstanding general obligation (GO) bonds and Syracuse Industrial Development Agency's (IDA) parking facility revenue bonds, excluding the GO bonds secured by the New York State Aid Intercept Program. At the same time, S&P assigned a'A' rating to the city's series 2017A, series 2017B, and series 2017C GO bonds. S&P also assigned a'SP-1' rating to the city's series 2017A bond anticipation notes (BANs). S&P noted that the outlook on the 'A' rating on the series 2017B is stable, based on the security provided by the New York State Aid Intercept program, pursuant to Section 99-b of the state finance law.
"The outlook revision is based on the city's continued drawdowns to fund operations, which we anticipate will continue in fiscal 2018, and which have increased in magnitude in recent years," said S&P Global Ratings credit analyst Rahul Jain. "We believe this continued reliance on reserves to balance operations is symptomatic of revenue raising efforts which have been limited, and thus unable to maintain pace with expense growth in recent years, which have been driven by escalating fixed costs."
The GO bonds and BANs are GOs of the city, secured by its faith and credit pledge. The series 2017A GO bond proceeds will fund various projects, including road reconstruction, bridge replacement, and facility improvements. The series 2017B GO bond proceeds will be used to provide funds for school recreational facilities. The series 2017C bonds will be used to provide funds for the settlement of claims.
The 2017A note proceeds will be used to renew outstanding BANs that were originally issued to continue the second phase of financing for a joint school construction board renovation project, as well as to provide new money for additional renovations associated with the renovation project.
The short-term note rating reflects the application of our criteria for evaluating and rating BANs, and the 'A' rating on the city's GO debt as the long-term rating on the intended takeout debt. However, S&P notes the city maintains the ability to issue debt through the Syracuse IDA where the IDA-issued bonds are secured by funds intercepted by the state comptroller. S&P states, the city has a low market-risk profile because it maintains strong legal authority to issue long-term debt to take out the notes and is a frequent issuer that regularly provides ongoing disclosure to market participants.