Fitch Rates Empire State Dev. Corp. (New York) Service Contract Rfdg Revs 'A+'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'A+' rating to approximately $420 million Empire State Development Corporation's New York State Urban Development Corporation service contract revenue refunding bonds series 2008A in five sub-series 2008A1-2008A5 expected to close June 24. Fitch confirms the 'A+' rating on the fixed rate conversion of 2002B-1 bonds and also affirms the 'A+' rating on $2.9 billion outstanding parity bonds.

The 'A+' rating reflects the payment of the bonds' debt service from a New York state service contract, subject to annual legislative appropriation. Fitch rates general obligations of the state of New York's 'AA-' recognizing the state's substantial wealth and resources and broad economy, somewhat tempered by uneven performance across the state. Net tax-supported debt ratios (currently 4.9% of personal income) have been relatively stable and are expected to remain above average but still in the moderate range; pensions are well funded. Although the state has taken steps to bolster its financial position in anticipation of future downturns, as reflected in the Positive Outlook, the significance of Wall Street performance to state revenues makes New York particularly vulnerable to a financial market downturn. Continuation of financial services industry losses and related fallout tied to the current credit market problems poses significant near term uncertainty.

These 2008A bonds are the tenth series of refunding bonds to refund bonds that constructed various state correctional and youth facilities. The bonds are issued under the 2005 general resolution but with a single 2008 state contract with the state of New York. Prior to the 2005 resolution there were separate service contracts for correctional facilities and youth facilities. Payment continues to rest with the State of New York from annual legislative appropriations from the general fund to meet debt service. State oversight is provided by the state budget director and comptroller, both of whom are required to approve bond issuance. The state budget director remains the payor under the service contracts securing the bonds.

The 2008A bonds are part of a $1 billion conversion and refunding operation which also include $450,365,000 2008B fixed rate refunding bonds and the $125 million of 2002B1 bonds which will be converted from auction rate to variable rate demand bonds.

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