MOODY'S LOWERS RATING ON TROY, N.Y.
NEW YORK, Jan. 26 /PRNewswire/ -- Effective today, Moody's Investors Service has lowered the rating on the general obligation bonds of the City of Troy, N.Y., from "Baa1" to Baa." In assigning the rating, Moody's said, "A sharp deterioration in the city's financial position ad a substantial increase in its indebtness, in part as a result of borrowing to finance operating deficits have weakened the city's credit position and lead to the rating revision from "Baa1" to "Baa." During 1991, shortfalls in two key revenue sources, state aid and landfill tipping fees, contributed to a year-end accumulated general fund deficit of $3.8 million, equivalent to 13 percent of the year's revenues. The problem was carried forward into the 1992 budget, which froze property tax rates while appropriating $1.2 million of fund balance which proved to be unavailable. The city has financed the deficit with part of the proceeds of a sale-leaseback transaction completed in March 1992. (Moody's has not rated the bonds issued in connection with this transaction.) Of the $35 million in total proceeds, $10.5 million were escrowed to pay general fund expenses; the remainder will cover the costs of various capital projects and fund capitalized interest and a debt service revenue. City officials now anticipate that they will need to use only $5 to $6 million of the escrow for operating expenses. Any amount remaining after three years may be used to redeem bonds. Aided by the deficit financing and increased tipping fee revenues, cash position has reportedly stabilized in 1992. Officials expect that a combination of actions, including a $3.9 million appropriation from the deficit financing escrow, a 7.6 percent increase in the property tax levy, and a freeze on filling budgeted but vacant positions will help to eliminate the accumulated general fund deficit by the end of the 1993. However, the city faces continuing challenges in reestablishing and maintaining a sound financial position. While the deficit financing helped the city avoid a disruption of services, it will contribute to a 50 percent increase in debt service costs between 1992 and 1995, placing a significant burden of future budgets. The lease transaction has roughly doubled the city's direct debt levels and slowed payout to a below-average pace. Proceeds available to pay operating costs exceed the deficits incurred to the point continued reliance on these proceeds to cover operating expenditures will signal a lack of resolve and may make it more difficult for the city to reestablish a sustainable fiscal balance and rebuild its reserves to an adequate level. Future credit quality will depend on the city's commitment to achieving financial stability. Absent a clear, demonstrated commitment to this goal, the city's "Baa" rating will be in jeopardy." -0- 1/26/93 /CONTACT: Brad Gewehr, senior analysts, Mid-Atlantic region of Moody's, 212-553-4789/
CO: ST: New York IN: SU: RTG
LD-SM -- NY111 -- 9307 01/26/93 17:17 EST
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|Date:||Jan 26, 1993|
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