Rating Action: Moody's assigns A3 to City of Yonkers, NY's GOLT bonds; outlook stableGlobal Credit Research - 25 Feb 2022Assigns enhanced A1 to Series D BondsNew York, February 25, 2022 -- Moody's Investors Service has assigned an A3 rating to the City of Yonkers, NY's $58.9 million General Obligation Serial Bonds-2022C, $22 million School Serial Bonds-2022D and the $7 million General Obligation Serial Bonds-2022E (Federally Taxable). Additionally, we have assigned a A1 enhanced rating to the School Serial Bonds-2022D bonds which are supported by the New York State Section 99-b Intercept Program. The issuer rating is the same as the general obligation unlimited tax rating and there is no debt associated with this rating. The outlook on the underlying ratings is stable. The city has approximately $570 million in general obligation limited tax (GOLT) bonds outstanding.RATINGS RATIONALEThe A3 reflects a financial position while improved, faces significant pressures. Budgets remain structurally imbalanced with management pushing out pension payments and issuing debt for operating expenses, despite the significant amount of state and federal aid received in 2021 and 2022. Additionally, the city could face financial pressure from a number of collective bargaining contracts that have been expired for several years. The A3 also reflects a growing long-term liability profile that is likely to worsen in the next three years given substantial debt plans. The rating is further supported by the city's sizeable tax base that continues to grow and expand and below average wealth profile compared to regional averages. The rating is further supported by strong governance as reflected in the Yonkers Act. The Act provides both state oversight of budgets and a lockbox mechanism for debt service.We consider the new bonds and the outstanding rated debt to be GOLT because of limitations under New York State law on property tax levy increases. The lack of distinction between the A3 GOLT rating and the A3 issuer rating reflects the city council's ability to override the property tax cap and the faith and credit pledge in support of debt service.The A1 enhanced rating on the 2022D bonds is based on additional security provided by the New York State Section 99-b Intercept Program. The program authorizes the state to withhold state aid in order to make bond payments in the event of default. The district's state aid to debt service coverage ratio over 10 times; thus, the district receives the programmatic rating.RATING OUTLOOKThe stable outlook reflects the improved financial flexibility that will remain as the city benefits from additional state and federal aid.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Continued growth and stability in reserves and liquidity- Significant decline in long-term liabilitiesFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Deterioration of reserves and liquidity- Continued growth in long-term liabilities outside of current projected debt needsLEGAL SECURITYThe 2022 bonds and outstanding bonds are backed by the city's general obligation pledge as limited by New York State's Property Tax Cap-Legislation (Chapter 97 (Part A) of the Laws of the State of New York, 2011). The bonds are further secured by the Yonkers Act, which requires the state comptroller to set aside first in sales tax and the city to set aside a portion of it's property tax revenues in a lockbox. Once these revenues have been segregated the city has no access to the bank account and the fiscal agent is required to ensure funds are sufficient for the payment of debt service and make debt service when payable. The Series 2022D bonds, as well as other bonds issued for school purposes, 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 PROCEEDSThe series C Bonds will provide financing for various city related projects.The series D Bonds will provide financing for various projects at the school district.The series E Bonds will provide financing for the payment of tax certiorari.PROFILEThe city of Yonkers is located in Westchester County, adjacent to New York City. In 2020 the Census Bureau estimated that the city had 211,569 residents.METHODOLOGY The principal methodology used in the underlying ratings was US Local Government General Obligation Debt published in January 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1260094. The principal methodology used in the enhanced rating was State Aid Intercept Programs and Financings published in December 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1067422. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies. REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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