NEW YORK - Moody's Investors Service has downgraded the city of Utica, N.Y.'s general obligation rating to Baa1 from A3, affecting $64.99 million in outstanding rated debt; the outlook remains negative.
The city's debt is 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 downgrade to Baa1 reflects fiscal deterioration beyond what the city previously projected. The city's continued structural imbalance has resulted in ongoing draws on fund balance and weakened liquidity.
The Baa1 rating also incorporates growth in the city's moderately sized tax base, weak socioeconomic indices, and above average debt position. The negative outlook reflects the challenges the city continues to face to restoring balanced operations and the replenishment of reserve levels.
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 not subject to the cap.