2008-11-08 14:42:03 -

- Fitch Ratings assigns an 'AA+' rating to the Town of Huntington, New York's (the town) $10.9 million public improvement serial bonds, series 2008A, and $2.9 million water district serial bonds, series 2007B. The current offering is expected to sell competitively on November 12, 2008.

Proceeds from the series 2008A&B bonds will provide new money for various capital projects

and redeem $6.4 million in outstanding bond anticipation notes maturing Dec. 5, 2008. In addition, Fitch has affirmed the rating on the town's $98.7 million in outstanding general obligation (GO) bonds at 'AA+'. The Rating Outlook is Stable.

The 'AA+' rating reflects the town's mature economic base supported by high residential wealth levels, strong financial operations characterized by ample reserves and strong liquidity in all major operating funds, and low debt levels supported by limited future capital needs. Sound financial management practices, including conservative budgeting and a demonstrated ability and willingness to raise recurring revenues, have led to a consistently stable financial position. Of concern, however, is the relatively high percentage of general fund revenue derived from mortgage tax receipts, which declined notably in the current fiscal year following several years of steady growth. However, Fitch believes the prudent establishment of designated funds coupled with the town's broad and diverse tax base in part limits the risk of this exposure.

The town is located on Long Island Sound at the western end of Suffolk County, approximately 40 miles east of Manhattan. With nearly 200,000 residents, the town is almost completely built out, limiting historical tax base growth. The town's economic base is diverse and includes utility, retail, and commercial firms among its largest taxpayers. Income levels compare favorably with the state and measure considerably higher than the national average. Good commuter access to New York City coupled with the stable nature of the town's largest employers is evidenced by an unemployment rate that typically ranks below the state and national figures. Not unlike state and national trends, the town's unemployment rate spiked over the last year, reaching 4.5% in August 2008 compared to just 3.3% at the same point in 2007.

With conservative budgeting practices and a demonstrated willingness to raise taxes to fund operations, the general fund has recorded surplus operations each year since fiscal 2001. A $1.5 million operating surplus in fiscal 2007 increased the town's unreserved general fund balance to a healthy $48.6 million, equal to a strong 50% of general fund spending. The town prudently maintains a combined unreserved fund balance across all its major operating tax-supported funds including the general, highway, refuse and garbage, and town outside village funds equal to $65 million at the close of 2007, equal to more than 40% of spending and transfers out.

Driven primarily by the performance of mortgage tax receipts and higher than budgeted fuel costs, fiscal 2008 is projected to end with a combined $6.5 million decline in fund balance across all operating funds. Mortgage tax receipts are projected to come in nearly 20% below budget and 44% below prior year's collections, evidencing the overall pressure stemming from national and regional economic and housing market conditions. The volatile revenue stream accounted for approximately about 10% of total operating revenue in fiscal 2008.

The town's capital needs are limited due to its well developed infrastructure and the built out nature of the town. The fiscal years 2009-2014 capital improvement plan (CIP) is manageable, totaling $60 million. Almost two-thirds of planned spending will benefit transportation and community service projects, while the balance of the plan will address parks and recreation and general government projects. In addition to utilizing current resources to fund capital projects on a pay-as-you-go basis, the town anticipates issuing $12 million-$15 million of GO debt annually to fund the CIP. The town's overall debt levels, including the current offering, are moderate on a per capita basis at $2,700 and low as a percentage of market value at 1.2%. Amortization is rapid, with 80% of principal retired within 10 years.

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Fitch Ratings, New York
Christopher Hessenthaler, +1-212-908-0773
Ann Flynn, +1-212-908-9152
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