NEW YORK - Moody's Investors Service said it has downgraded the city of Utica, N.Y.'s long-term rating to A3 from A2 and assigns a negative outlook affecting $59.8 million in outstanding GO debt, including the current issue.
Utica's $6.0 million general obligation refunding bonds, Series 2012 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). Proceeds of the current sale will be used to advance refund the city's Series 2003 bonds for estimated net present value savings of $425,000, or 7%.
The downgrade to A3 reflects the deterioration in the city's finances over the past five years, draw-down of reserves, low cash levels, and a structurally imbalanced budget. It also incorporates a weak but growing tax base and somewhat high debt levels. The negative outlook reflects the challenges faced by the city in replenishing its reserves and restoring structural balance to financial operations.
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 school district general obligation debt issued in New York as an unlimited tax pledge and continue to research the impact of the property tax cap on debt issued by nonschool districts.
