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Farmingdale Union Free School District, NY -- Moody's has assigned a Aa2 rating to Farmingdale UFSD, NY's $36M GO Bonds

·12 mins read

Rating Action: Moody's has assigned a Aa2 rating to Farmingdale UFSD, NY's $36M GO Bonds

Global Credit Research - 31 Aug 2020

New York, August 31, 2020 -- Moody's Investors Service has assigned a Aa2 rating to Farmingdale Union Free School District, NY's $36 million School District Serial Bonds - 2020. Moody's currently maintains a Aa2 rating on the district's outstanding parity general obligation bonds.

RATINGS RATIONALE

The Aa2 rating reflects the district's well-sized sized tax base, strong resident wealth and income, and adequate financial position. The rating also incorporates the district's manageable long-term liabilities.

We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The coronavirus crisis is not a key driver for this rating action but could affect the district in fiscal 2021 which began July 1. The district depends on state aid for approximately 20% of its operating revenue. The State of New York (Aa1 negative) is currently experiencing significant declines and delays in income tax and sales tax revenue. Unless the federal government provides additional assistance, the state will likely reduce state aid to school districts in 2021, possibly resulting in use of some of the district's financial reserves, property tax increases and/or expense cuts. Given the district's below average exposure to state aid and conservative budgeting, cuts to state aid are expected to remain manageable. The situation surrounding coronavirus is rapidly evolving and the longer-term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of the district changes, we will update the rating and/or outlook at that time.

RATING OUTLOOK

Outlooks are not typically assigned to local government credits with this amount of debt outstanding.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING

- Material strengthening of financial position

- Sustained growth of tax base

- Meaningful improvement of local resident incomes

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING

- Erosion of financial position

- Material growth to debt, pensions or OPEB burdens

- Sharp tax base contraction

LEGAL SECURITY

The bonds are secured by the district's faith and credit supported by its authority to levy ad valorem taxes to pay debt service on all taxable property within the district without limitation as to rate or amount. The bonds are further secured by the State of New York's commitment to advance available state aid to pay debt service pursuant to the state's Section 99-b intercept program.

USE OF PROCEEDS

Proceeds of the bonds will be used to upgrade district athletic facilities and for various districtwide capital improvements. $17.8 million of the bonds will redeem bond anticipation notes maturing September 18, 2020 and the remaining $18.2 million will be new money.

PROFILE

The district is located in western-central Long Island, along the Nassau-Suffolk County border, approximately 35 miles east of New York City. Approximately 80% of the district is located in the Town of Oyster Bay, Nassau County and approximately 20% is located in the Town of Babylon, Suffolk County. The district has an estimated population of 41,224 and a land area of approximately 6 square miles.

METHODOLOGY

The principal methodology used in this rating was US Local Government General Obligation Debt published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1230443. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Joseph Manoleas Lead Analyst Regional PFG Northeast Moody's Investors Service, Inc. One Front Street Suite 1900 San Francisco 94111 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Robert Weber Additional Contact Regional PFG Northeast JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653

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