Moody’s Investors Service said last week that the risk profile of New York local governments’ debt — other than school districts — subject to the new property tax cap remains unchanged.
“Based on the terms of the cap and our understanding of how it will operate, we do not foresee making rating distinctions between the debt subject to the cap, which we refer to as carrying a limited-tax pledge, and the same issuers’ unlimited-tax pledge,” Moody’s analysts wrote in a report.
Moody’s said the ratings will remain the same because the hurdle to pierce the cap is relatively low, the property tax cap law sunsets in 2016, and the law may be subject to a legal challenge.
Still, “the cap will pressure the credit quality of all New York local governments, and could result in a reduction of fund balance levels for some,” the report said.
Among the municipalities with low reserve levels that face the greatest pressure are Suffolk County (A1), Long Beach (Baa3), Yonkers (Baa1), and Rockland County, which was recently downgraded to Baa3 from A3.
If there is a change in the law that increases the difficulty to override the cap, or if the law is extended beyond the 2016 date, Moody’s will reassess the effect of the cap.
