As part of its continuous surveillance effort, Fitch Ratings affirms the 'AA-' underlying long-term rating on the following Dormitory Authority of the State of New York (DASNY) bonds:
--Approximately $580 million outstanding municipal health facilities improvement program lease revenue bonds (New York City Issue) 1998 series 1, 2001 series 1 and 2, and 2008 series 1.
The Rating Outlook is Stable.
KEY RATING DRIVERS
--The 'AA-' rating is based on the credit quality of the City of New York (general obligations [GO] rated 'AA' by Fitch), as bonds are secured by the city's lease rental payments, subject to annual appropriation.
--Bond security is enhanced by the presence of a state aid intercept mechanism.
--New York City's advanced, effective budget monitoring and management and conservative revenue forecasting have allowed the city to react quickly to changing conditions and consistently generate operating surpluses before discretionary transfers.
--The city has an extended history of effectively eliminating sizable out-year budget gaps, mitigating risk to the inability to maintain a rainy day reserve;
--The city has a broad economic base and a unique role as a national and international center for commerce and culture. Income levels are high.
--Key revenue streams are closely linked to the cyclical financial services industry and the real estate market.
--The city's debt levels are expected to remain high despite recent action to reduce future borrowing.
--Annual personnel costs, particularly pension contributions, are expected to consume an increasingly large share of general fund resources.
WHAT COULD TRIGGER A RATING ACTION?
--Changes to New York City's GO rating, to which this rating is linked.
SECURITY
The bonds are secured by lease payments made by the City of New York, subject to annual appropriation, as well as a state aid intercept mechanism.
CREDIT PROFILE
Bond proceeds have funded capital projects for various facilities of the city's Health and Hospitals Corporation. The funding of debt service is from city lease payments made to DASNY, subject to annual appropriation. The city has a strong incentive to appropriate, as a failure to do so triggers state intercept of city Medicaid appropriations, which would provide wide coverage of debt service.
City lease payments are paid well in advance of when debt service is due. If the city payment has not been made within five days of the payment date, the authority shall file with the city a certificate stating the amount due. If the city does not pay such amount within 10 days of receiving such certificate, the authority certifies to the state comptroller the amount due and the state comptroller shall pay the amounts from Medicaid sources.
For more information on New York City's 'AA' general obligation rating and Stable Rating Outlook, see Fitch Research 'Fitch Rates New York City's $600MM GO Bonds 'AA'; Outlook Stable' dated July 15, 2011.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated Aug. 16, 2010;
--'U.S. Local Government Tax-Supported Rating Criteria', dated Oct. 8, 2010.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548605
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564566
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