Moody's upgrades Town of Stillwater NY's GO to A1

Global Credit Research - 10 Mar 2014

STILLWATER (TOWN OF) NY

Cities (including Towns, Villages and Townships) NY

NEW YORK, March 10, 2014 --Moody's Investors Service has upgraded to A1 from A2 the rating on the Town of

Stillwater's (NY) outstanding general obligation debt. This action concludes a review for possible upgrade that

Moody's had initiated on January 15, 2014 in conjunction with our new local government general obligation

methodology.

RATING RATIONALE

The upgrade reflects the town's improved financial profile and positive multi-year financial trends. The town's low

unfunded pension liability also contributed to the upgrade. Other key considerations include the town's limited tax

base, average wealth levels and manageable debt burden.

STRENGHTS

- Healthy reserve and liquidity position

- Manageable debt burden

-        Low unfunded pension liability

-

CHALLENGES

- Limited tax base

- Unknown unfunded OPEB liability

- Fund balance appropriations to balance budgets

DETAILED CREDIT DISCUSSION

STRONG RESERVE LEVELS BOLSTER FINANCIAL POSITION

Moody's believes the town will continue to maintain a healthy financial position, despite anticipated use of

reserves, given ample reserve levels in the town's operating funds. The town generated four consecutive

operating deficits in fiscal years 2006-2009 which lead to slim reserve levels. However, following surpluses in

fiscal years 2010-2012, the town's total General Fund balance increased to $568,000 (a healthy 33.9% of

revenues), up from $109,000 (8.8% of revenues) in 2009. Fiscal 2012 unassigned General Fund balance

increased to $557,000, or 33.3% of revenues.

On a combined basis, including the General Outside Village and Highway funds which are predominately

supported by property tax revenues, operating fund balance equaled $2.1 million (a strong 43.1% of combined

revenues) and Unassigned Fund Balance was $2.0 million (41.1% of revenues) in fiscal 2012. The healthier

reserve position of the town's combined operating funds relative to the General Fund has historically been driven

by conservative budgeting for transportation expenditures and strong performance of sales tax revenues.

The town expects fiscal 2013 to end with a $500,000 draw on operating reserves, mostly due to one-time capital

expenditures, which will decrease the total operating fund balance to approximately $1.6 million, or a healthy 33%

of operating revenues. The fiscal 2014 operating budget increased 15% (budget-to-budget) and is balanced with a

$485,000 reserve appropriation as the town did not increase the tax levy. If the appropriation is not replenished,

the total operating fund balance will decrease to approximately $1.1 million, or 20% of revenues. Property taxes

represent 49.1% of fiscal 2012 operating fund revenues, followed by sales tax at 37.6%.

LIMITED TAX BASE WITH MODEST RECENT INCREASES

Moody's anticipates that the town's limited $722 million tax base will continue to benefit from proximity to

established employment centers in the cities of Albany (rated A1) and Schenectady (GO rated A3 negative).

Assessed value has increased at an average rate of 1.3% annually over the past three years, reflecting modest

new residential development. Full value has fallen at an average annual rate of 1% since 2009 due to significant

softening of the regional real estate market and some property being taken off of the tax roll. Full value did increase

1.1% and 1.8% in 2013 and 2014, respectively. The town expects future growth from GlobalFoundries, a producer

of computer chips, which has stated intentions to build a new manufacturing plant. GlobalFoundries is located in

the towns of Stillwater and Malta (rated Aa2), and both towns approved the expansion in August. The expansion is

expected to generate an additional 4,500 jobs and the company's payments in lieu of taxes (PILOT) are expected

to more than double. The town currently receives approximately $500,000 in PILOT payments annually from

GlobalFoundries. The town's median family income is slightly above state and national levels and the full value per

capita is average at $87,138.

AVERAGE DEBT PROFILE EXPECTED TO REMAIN MANAGEABLE; TOTAL UNFUNDED OPEB LIABILITY

UNKNOWN

Moody's expects the town's direct debt burden (1.3% of full value) will remain manageable, given slightly above

average amortization of debt (83.9% within 10 years) and limited future borrowing plans. The town's plan to borrow

approximately $6.8 million of long-term debt for a water project is contingent on GlobalFoundries building the new

plant, as the town would use the additional PILOT payments to pay debt service. The town currently has a $4.1

million bond anticipation note (BAN) outstanding, which it plans to defease later this year if the GlobalFoundries

plant gets built, since the town will receive a $3 million donation and an estimated $1.5 million in permit fees from

GlobalFoundries. Otherwise, the town has the option of refunding the BAN with long-term debt and using current

PILOT revenues to pay debt service. The overall debt burden increases to 2.5% when the town's pro rata share of

overlapping debt obligations with Saratoga County (rated Aa2 negative) and school and fire districts are included.

Debt service in fiscal 2012 represented a manageable 6.1% of operating expenditures and the debt portfolio

consists entirely of fixed rate debt and the town is not party to any derivative agreements.

The town contributes to the New York State and Local Employees' Retirement System, a cost sharing multiemployer

defined benefit plan. The town fully funds its Annual Required Contribution, which was $206,000 in 2012,

representing 5% of operating expenditures. The town's adjusted net pension liability, under Moody's methodology

for adjusting reported pension data, is $2.5 million, or a below-average 0.51 times General Fund revenues.

Moody's uses the adjusted net pension liability to improve comparability of reported pension liabilities. The

adjustments are not intended to replace the town's reported liability information, but to improve comparability with

other rated entities. We determined the town's share of liability for the state administered plan in proportion to its

contributions to the plan.

Currently, the town has not adopted GASB 45 and its total unfunded liability for Other Post Employment Benefits

(OPEB) is unknown. The OPEB cost is funded on a pay-as-you-go basis and the town contributed $47,000 for six

retirees in fiscal 2012. Total fixed costs for fiscal 2012, including pension, OPEB and debt service, represented

$505,000, or 12.1% of operating expenditures.

WHAT COULD MAKE THE RATING GO UP

- Substantial growth of reserves and liquidity

- Strong tax base growth

- Significant improvement in the demographic profile

WHAT COULD MAKE THE RATING GO DOWN

- Declines in reserve levels or liquidity position

- Deterioration of the town's tax base and demographic profile

KEY STATISTICS

2014 Full Value: $722 million

2014 Full Value Per Capita: $87,138

Median Family Income as % of US: 105.9%

Fiscal 2012 Operating Funds balance as a % of Revenues: 43.1%

5-Year Dollar Change in Operating Fund Balance as % of Revenues: 20.8%

Fiscal 2012 Cash Balance as % of Revenues: 40.1%

5-Year Dollar Change in Cash Balance as % of Revenues: 21.2%

Institutional Framework: A

5-Year Average Operating Revenues / Operating Expenditures: 1x

Net Direct Debt as % of Full Value: 1.3%

Net Direct Debt / Operating Revenues: 1.9x

3-Year Average of Moody's ANPL as % of Full Value: 0.2%

3-Year Average of Moody's ANPL / Operating Revenues: 0.4

The principal methodology used in this rating was US Local Government General Obligation Debt published in

January 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory

disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class

of debt 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 rating action on the support provider and in relation to each particular 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.

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.

Analysts

Heather Guss

Lead Analyst

Public Finance Group

Moody's Investors Service

Geordie Thompson

Additional Contact

Public Finance Group

Moody's Investors Service

Contacts

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Research Clients: (212) 553-1653

Moody's Investors Service, Inc.

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New York, NY 10007

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