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Moody's Downgrades A Village In New York As America Retains Its AAA Rating

Tyler Durden's picture





 

Ever wonder how Moody's keeps itself busy in all the free time it has when it is not focusing on how to break the news that the US is really a B-rated credit? Here it is: the rating agency is now focusing on the ratings of villages (in this case the Village of Johnson City) with $8.1 million in debt and 14k citizens. And, not too surprisingly, a village somewhere in the bowels of upstate New York was just downgraded from A1 to A3. As to when Moody's will get back to providing a fair and honest rating on he insolvent developed world, they will get back to you.

From Moody's

NEW YORK, Sep 8, 2010 -- Moody's Investors Service has downgraded the Village of Johnson City's (NY)
rating to A3 from A1 and assigned a negative outlook affecting $8.1 million in
outstanding rated general obligation debt, secured by the village's general
obligation, unlimited tax pledge.

RATINGS RATIONALE

The downgrade reflects the village's materially changed financial
position, characterized by a narrow General Fund balance, which declined
to $234,000 or a slim 1.6% of General Fund revenues in fiscal 2009 (ended May
31) from $929,000 or 5.9% of General Fund revenues in fiscal 2008. Assignment of
the negative outlook reflects the potential for further downward rating pressure
given ongoing expenditure pressures, the uncertainty of pending tax appeals, and
the village's limited ability to absorb these events or other
contingencies given its already narrow financial position.

Moody's believes the village's financial position and liquidity will
remain pressured, as fiscal 2009 ended with a $1.07 million operating deficit as
a result of reclassification of $831,000 of bond anticipation note (BAN)
proceeds that had been improperly budgeted as General Fund revenues in prior
years. Consequently, village officials state that the New York State Comptroller
adjusted the village's total fund balance to negative $182,000 or negative
1.3% of General Fund revenues. In fiscal 2009, approximately two thirds of the
village's Operating Fund revenues were derived from ad valorem taxes (60.2%),
followed by local option sales taxes (24.2%), an economically sensitive revenue
stream which performed weakly in fiscal 2009 across the state and nation. A
shortfall of $237,000 in sales tax collections in fiscal 2010 were offset by a
variety of expenditure reductions, which replenished a budgeted fund balance
appropriation of $86,400 of General Fund balance and contributed to a surplus of
$660,000. However, the surplus was largely driven by the elimination of
six firefighter positions in July 2009 which reportedly broke the
collective bargaining contract. The village is currently in arbitration and may
face a liability of up to $1.25 million, a significant amount that could be
absorbed with proceeds of a bond issuance. Village officials stated the fiscal
year ended with a total General Fund balance of $350,000 after a retro payment
of $200,000 to state police department officers as they have not been under
contract since May 2006. This additionally has an estimated total liability of
$750,000 as village officials are unsure of what arbitration will determine.

In fiscal 2011, the village reduced its appropriation of fund balance to $13,000
along with receiving a one-time revenue of $130,000 from recourse of the
village's Police Evidence Storage, which is a restricted revenue source that can
only be used for drug related police expenditures. Management does not have a
formal General Fund balance policy and reports that fiscal 2011 operations are
performing better than budget with the expectation of an addition to General
Fund balance at year-end, given general trends.

The A3 rating additionally reflects the expectation that the
village's moderately sized $714 million tax base will decline over the near term
due to a successful tax appeal from Macy's, a tenant of top ten taxpayer Oakdale
Mall Association (8.9% of total assessed valuation). The tax appeal results in a
$270,000 (0.9% of total AV) reduction in Macy's AV which will affect fiscal year
2012 tax rolls along with a one-time payment of $63,000 during the current
fiscal year. The village will partially offset this reduction with property
taxes from a recently opened Wal-Mart, which has a seven year fixed assessment
of $124,000 (0.4% of total AV) along with creating approximately 300 new jobs.
The net impact of the tax appeal and Wal-Mart will be approximately $39,000 of
lost property tax revenue. Located in Broome County (rated A1/no outlook), the
village is characterized by wealth and income indices below that of the median
for similarly rated New York municipalities.

The rating also reflects the village's slow amortization of principle (39.2%
repaid within 10 years) and high gross direct debt burden (6.5%) which is
reduced after incorporating the village's self-supporting sewer debt (2.0% net
direct; 4.3% overall). The village's adjusted debt burden is expected remain
above-average as the village plans to issue in the near future $7.6 million of
sewer bonds along with issuing $350,000 of BAN's this fall for sewer related
equipment (sewer fund is expected to remain self-supporting). All of the
village's debt is fixed rate and the village is not party to any derivative
agreements.

OUTLOOK

Assignment of the negative outlook reflects the villages limited
financial position and ongoing challenges to balance operations and replenish
reserves.

 

KEY STATISTICS

2008 Population: 14,727 (-5.2% decrease since 2000)

2010 Full Valuation: $714 million

2010 Full Value Per Capita: $48,512

1999 Per Capita Income (as % of NY and US): $17,511 (74.9% and 81.1%)

1999 Median Family Income (as % of NY and US): $39,241 (75.9% and 78.4%)

Adjusted Net Direct Debt Burden: 2.0%

Overall Debt Burden: 4.3%

Payout of Principal (10 years): 39.2%

2009 General Fund Balance: $234,000 (1.6% of General Fund revenues)

2009 Adjusted General Fund Balance: -182,000 (-1.3% of General Fund revenues)

Long-term G.O. Debt Outstanding: $25.6 million

The principal methodology used in rating Johnson City (Village of) NY was
General Obligation Bonds Issued by U.S. Local Governments rating methodology
published in October 2009. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found on Moody's
website.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties
involved in the ratings, public information.

Moody's Investors Service considers the quality of information available on the
credit satisfactory for the purposes of maintaining a credit rating.

MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S is not an auditor and
cannot in every instance independently verify or validate information
received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back
to a time before Moody's Investors Service's Credit Ratings were fully
digitized and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it. Please
see the ratings disclosure page on our website www.moodys.com for
further information.

Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning of each
rating category and the definition of default and recovery.

 


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Wed, 09/08/2010 - 16:08 | Link to Comment traderjoe
traderjoe's picture

Wake me when they do a wholesale 3 notch downgrade of the entire GO muni market - bitchez!

Wed, 09/08/2010 - 21:58 | Link to Comment CPL
CPL's picture

/b/rofist

 

Word up wegro.

Wed, 09/08/2010 - 16:08 | Link to Comment Ragnarok
Ragnarok's picture

It would be something out of Monty Python if this village of 14000 brings all of Western Civilization down with it. LOL....

Wed, 09/08/2010 - 17:42 | Link to Comment Ragnar D
Ragnar D's picture

It'll be this village, a few hundred others, a certain Crook County Illinois, Detroit, half of California, the entire state of New Jersey, etc.

 

Death by a thousand deadbeat moochers.

Wed, 09/08/2010 - 22:00 | Link to Comment CPL
CPL's picture

Kissed to death by a million butterflies...it's facinating and horrific at the same time.

Wed, 09/08/2010 - 16:08 | Link to Comment Wheatman
Wheatman's picture

Moodys, a bunch of retarded morons. The USA is bankrupt. Period. Yet these morons are paid to shut up. Can't wait for the Bond collapse of 2012.

Wed, 09/08/2010 - 16:11 | Link to Comment NOTW777
NOTW777's picture

they need to downgrade geithners lying ability. still trash talking and laughably talking about the "recovery"

Wed, 09/08/2010 - 16:12 | Link to Comment Hephasteus
Hephasteus's picture

The new village attack.

The Downgrade.

Don't make me send in the village dissers. Cause dey gonna dis you hard.

Wed, 09/08/2010 - 16:17 | Link to Comment pigpen
pigpen's picture

The Mouse That Roared II - small village in NY takes down the world. Who will play Peter Sellers?

Wed, 09/08/2010 - 16:33 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Isn't this the home of "The Village People"?  :>)

http://www.youtube.com/watch?v=CS9OO0S5w2k

Wed, 09/08/2010 - 16:17 | Link to Comment LoneStarHog
LoneStarHog's picture

It Takes A Village -- Hillary Clinton

Wed, 09/08/2010 - 16:48 | Link to Comment willien1derland
willien1derland's picture

+1 - Village Bitchez!

Wed, 09/08/2010 - 16:19 | Link to Comment Sudden Debt
Sudden Debt's picture

downgrading the US would be like spitting in the face of a loon on steroids with a loaded gun

Wed, 09/08/2010 - 16:30 | Link to Comment molecool
molecool's picture

You have to admit - it does sound entertaining though. Reality show?

Wed, 09/08/2010 - 21:08 | Link to Comment mtomato2
mtomato2's picture

What's a small, aquatic waterfowl doing with a gun?

How does he hold it?

Wed, 09/08/2010 - 16:18 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Has moody looked at our books here in Illinois .... We privatized the parking meters to the tune of $1.15 billion that money is gone in like a year but they signed a 75 year contract, oh well.

I think we need something like for 5 billion... What is our rating outlook ?

Wed, 09/08/2010 - 16:50 | Link to Comment digitalhermit
digitalhermit's picture

On the brighter side - maybe getting raped at the parking meters will encourage Chicagoans to use their cars less frequently and stay off the city streets, easing congestion just a tad.

Wed, 09/08/2010 - 17:45 | Link to Comment Ragnar D
Ragnar D's picture

And sending them onto public transportation, where even after the Feds pay for all capital spending (~50% of costs), the operating costs alone are $7-8 per train ride, $10-12 per bus ride, and they're charging $2, unless you're part of a vote-buying free ride program.

Wed, 09/08/2010 - 16:19 | Link to Comment Bankster T Cubed
Bankster T Cubed's picture

moody's

what a joke

Wed, 09/08/2010 - 16:19 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

I got it! have those dumb fucks who ALLOWED their elected officals to run up the debt all pitch in 600 bucks a piece and youre outta trouble.

It reminds me of that article from Bell, CA which is about the size of this village and they pay the HNIC 750k/yr. and their very own chief Wigam a cool 457k/yr. Ok, so they split, whootie shit, they still get a pension the size of their salaries!

Lastly, Tyler, you KNOW full well the Moody's people are filling their hard drives with PORN. And when that 2TB is done, move onto DVDs- they hold more than CDs.....

"when the music's over turn out the lights!"

 

Wed, 09/08/2010 - 16:22 | Link to Comment Hang The Fed
Hang The Fed's picture

No, no...it's totally fine!  No one in the good ol' boys club of the federal government lives there, so Moody's can hack away as they please without having to worry about making any of their front-men look bad.

As long as it's just Joe Regular taking it in the ass, it's not a real problem.

Wed, 09/08/2010 - 16:22 | Link to Comment aurum
aurum's picture

how can any of us continue to pursue "honest" work in the financial markets?..i think i am through (other than taking care of the family and my own personal investments)...its just sickening anymore...i seriously think i am going to leave this all behind and pursue some truth in my career...fuck em all...

Wed, 09/08/2010 - 17:48 | Link to Comment Marley
Marley's picture

"honest work in the financial markets"?

Ha..Haw haw.....Hawhahahahahahahahahah.....

Wed, 09/08/2010 - 16:26 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Do not forget Obama is coming on tonight, all problems solved ...

Wed, 09/08/2010 - 16:31 | Link to Comment unwashedmass
unwashedmass's picture

 

ah, so this is what they are working on now when they aren't watching porn~

Wed, 09/08/2010 - 16:31 | Link to Comment unwashedmass
unwashedmass's picture

 

ah, so this is what they are working on now when they aren't watching porn~

Wed, 09/08/2010 - 16:33 | Link to Comment T Rex
T Rex's picture

It will be easier if they do the states in alphabetical order.

Wed, 09/08/2010 - 16:42 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

 

 

 

 

Looting Main Street

If you want to know what life in the Third World is like, just ask Lisa Pack, an administrative assistant who works in the roads and transportation department in Jefferson County, Alabama. Pack got rudely introduced to life in post-crisis America last August, when word came down that she and 1,000 of her fellow public employees would have to take a little unpaid vacation for a while. The county, it turned out, was more than $5 billion in debt — meaning that courthouses, jails and sheriff's precincts had to be closed so that Wall Street banks could be paid.

As public services in and around Birmingham were stripped to the bone, Pack struggled to support her family on a weekly unemployment check of $260. Nearly a fourth of that went to pay for her health insurance, which the county no longer covered. She also fielded calls from laid-off co-workers who had it even tougher. "I'd be on the phone sometimes until two in the morning," she says. "I had to talk more than one person out of suicide. For some of the men supporting families, it was so hard — foreclosure, bankruptcy. I'd go to bed at night, and I'd be in tears."

Homes stood empty, businesses were boarded up, and parts of already-blighted Birmingham began to take on the feel of a ghost town. There were also a few bills that were unique to the area — like the $64 sewer bill that Pack and her family paid each month. "Yeah, it went up about 400 percent just over the past few years," she says.

The sewer bill, in fact, is what cost Pack and her co-workers their jobs. In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 — but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase. The result was a monstrous pile of borrowed money that the county used to build, in essence, the world's grandest toilet — "the Taj Mahal of sewer-treatment plants" is how one county worker put it. What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human shit into billions of dollars of profit for Wall Street — and misery for people like Lisa Pack.

http://www.rollingstone.com/politics/news/12697/64833?RS_show_page=0

Wed, 09/08/2010 - 16:59 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Bankruptcy would be the answer. Tell the banksters to f*ck off!

Wed, 09/08/2010 - 16:39 | Link to Comment Bartanist
Bartanist's picture

The kid down the street has a lemonade stand that Moody's can rate. It is about the only thing they can do without perjuring themselves or causing people unjustified harm.

Wed, 09/08/2010 - 16:39 | Link to Comment newstreet
newstreet's picture

I know Johnson City - the home of the square deal.

The police and firefighters make a fortune there.  It's big news in the local paper.

Wed, 09/08/2010 - 16:42 | Link to Comment cougar_w
cougar_w's picture

They are starting small. If this works out, they'll tackle something larger like a state capital, then maybe one of the fly-over states to see how things scale. At the end of all this they take on the real target of all this; your mom.

Hah.

Wed, 09/08/2010 - 16:52 | Link to Comment Paper CRUSHer
Paper CRUSHer's picture

This 'Village of the Damned' aint gonna cause shit to happen.Just another small hicktown. The inhabitants of this small village shouldn't let this downgrade get to them.After all,the sewer is self supporting and plus no exposure to derivatives, what more could ya ask for.

Just make damn sure that sewer remains operational folks ya hear.

Wed, 09/08/2010 - 18:00 | Link to Comment merehuman
merehuman's picture

All indoor toilets will be pay toilets. Bullish!

Wed, 09/08/2010 - 19:57 | Link to Comment puckles
puckles's picture

No kidding, that's exactly what the State of Maryland (where I unhappily reside) did--see CNBC.com's expose today on oddball taxes you may be paying...the "flush" tax...

Wed, 09/08/2010 - 16:50 | Link to Comment Village Idiot
Village Idiot's picture

Bound to be some crack about a village idiot so let me just get out in front here...

Wed, 09/08/2010 - 18:33 | Link to Comment Dismal Scientist
Dismal Scientist's picture

Dubya was once referred to as 'Global Village Idiot'. Nothing left to aspire to after that.

Wed, 09/08/2010 - 19:05 | Link to Comment Village Idiot
Village Idiot's picture

That's what I get for thinking small.  I coulda been a contenda...

Wed, 09/08/2010 - 21:28 | Link to Comment Hephasteus
Hephasteus's picture

That's the problem with globalism. It's run by every village idiot on the planet. Hasn't nigel tought you anything.

Wed, 09/08/2010 - 16:52 | Link to Comment Jake Lamotta
Jake Lamotta's picture

With your criticism, all you idiots are literally missing this rally!  Bunch of bozos...

Wed, 09/08/2010 - 16:58 | Link to Comment Village Idiot
Village Idiot's picture

"With your criticism, all you idiots are literally missing this rally!  Bunch of bozos..."

 

Even the great jake Lamotta wasn't to be trusted...

 

LaMotta, who compiled a record of 83 wins, 19 losses and four draws with 30 wins by way of knockout, was the first man to beat Sugar Ray Robinson,[1] knocking him down in the first round of their first fight and then outpointing him over the course of 10 rounds during the second fight of their legendary six-bout rivalry.

On 14 November 1947, LaMotta was knocked out in four rounds by Billy Fox.[1] Suspecting the fight was fixed, the New York State Athletic Commission withheld purses for the fight and suspended LaMotta. The fight with Fox would come back to haunt LaMotta later in life, during a hearing with the Federal Bureau of Investigation.

In his testimony and in his later book, LaMotta admitted to throwing the fight in order to gain favor with the Mafia. All involved agreed the fix was obvious and their staging inept. As LaMotta wrote,

The first round, a couple of belts to his head, and I see a glassy look coming over his eyes. Jesus Christ, a couple of jabs and he's going to fall down? I began to panic a little. I was supposed to be throwing a fight to this guy, and it looked like I was going to end up holding him on his feet ... By [the fourth round], if there was anybody in the Garden who didn't know what was happening, he must have been dead drunk."[3]

The thrown fight and a payment of $20,000 to the Mafia got LaMotta his title bout against Marcel Cerdan.[4]

Wed, 09/08/2010 - 17:02 | Link to Comment cougar_w
cougar_w's picture

+1 interesting

Wed, 09/08/2010 - 16:54 | Link to Comment RobotTrader
RobotTrader's picture

Meanwhile, California Munis are launching to fresh, new, world record highs....

Looks like "Paper" has trumped "Things" as the go to investment of the decade..

LOL...

Wed, 09/08/2010 - 20:26 | Link to Comment puckles
puckles's picture

Until, that is, they all implode.  Funny thing, today's WSJ had quite a writeup on a little town in PA of only 47,000 souls.  Harrisburg, to be exact, and they just defaulted on a $3.29 million bond payment. A mere bagatelle, one might argue, considering the fact that the previous Mayor bought "...$7.8 million in artifacts for a Wild West Museum that never happened."  The article further related that 28% of the residents were below the federal poverty level, although no retrogression to 2009 (the previous Mayor) was offered; one doubts it has changed much--this is the Rust Belt, after all.

These facts are symptomatic of an epochal burst bubble.  Forget that they were rolling from one Fed-induced item into another; the net effect is far larger.  Who in his wildest--and thoroughly broke-imagination would have thought in 1980 that some already dead, and becoming deader, little community in PA would ever have been afforded such luxurious credit?  Only an utter maniac.  

But a mania it has been, and the correction will be equally epochal, I very much fear. Some Elliott Wave people have been likening this bubble burst to the end of the South Sea Bubble, which featured similar idiocies.  That decline lasted around 70 years, and birthed both the American (Conservative) Revolution, and the French (Radical) Revolution; both were based on Enlightenment writings, yet with radically different readings.  Both of these revolutions have been credited (or blamed) over time with the writings of Marx and Engels, the Revolutions of 1848, the Wars of Italian Liberation, and the Marxist Coup of 1917 in Russia, over the Mensheviks.  God help us if we are to enter another such period.

Wed, 09/08/2010 - 17:30 | Link to Comment JohnKing
JohnKing's picture

Johnson City has a pretty cool history. It was really an experiment in welfare capitalism.

http://en.wikipedia.org/wiki/Endicott_Johnson_Corporation

 

Endicott-Johnson Co. & The Square Deal


In 1899, Johnson became co-owner of the business, which was renamed the Endicott-Johnson Co. Under his presidency, the company grew to eight factories in Broome County, New York, employing about 10,000. Endicott-Johnson was the first company in the shoe industry to introduce the 8-hour workday, 40-hour workweek, and comprehensive medical care. Despite paying some of the highest wages in the industry, Endicott-Johnson was consistently profitable.

 

Until he died in 1948, Johnson saw to it that Endicott-Johnson employees received a range of benefits that were not typically offered by most employers at the time. He valued his employees and had the company build high quality homes for them (which the employees could buy for rates as low as $7 per week, with an interest rate of only 1 percent). The company also created parks (containing swimming pools and carousels that anyone could ride for free), medical facilities, restaurants, libraries, and recreational facilities—all designed to provide high quality goods and services to the employees for free or at a low cost.

 

The community of Lestershire was renamed Johnson City, New York in 1916 in honor of Johnson, and Endicott-Johnson workers built two arches over the area’s main road in the early ’20s, one at the entrance to Johnson City and the other in Endicott, New York stating that they were the gateways to the "Square Deal Towns". Endicott-Johnson would become the largest manufacturer of footwear in the United States, employing 24,000 workers at its peak.

All gone now, bye bye. The "capitalist" no longer contributes.

Wed, 09/08/2010 - 17:51 | Link to Comment trav7777
trav7777's picture

so how long before every city and state in the US is downgraded several notches but the "US" keeps AAA?

Wed, 09/08/2010 - 22:32 | Link to Comment CPL
CPL's picture

Like sucking the jelly out of a donut and selling it as a jelly donut.

Thu, 09/09/2010 - 00:03 | Link to Comment Serenity Now
Serenity Now's picture

"If you want to know what life in the Third World is like, just ask Lisa Pack, an administrative assistant who works in the roads and transportation department in Jefferson County, Alabama."

 

Third world countries don't have sewers, health insurance, nice suburbs, or bankruptcy, but the article got the 'corrupt officials' part right.  I'm sure we can take care of the rest with all our leaders making the right decisions.  Third world, here we come.

Thu, 09/09/2010 - 05:13 | Link to Comment Azannoth
Azannoth's picture

Somewhere in America a Village is missing it's AAA rating lol

Tue, 09/28/2010 - 03:47 | Link to Comment Herry12
Do NOT follow this link or you will be banned from the site!