Press Release|Public Finance
KBRA Assigns AAA Rating with Stable Outlook to Dormitory Authority of the State of New York State Sales Tax Revenue Bonds, Series 2024A (Tax-Exempt)
8 Jul 2024 | New York
KBRA assigns a long-term rating of AAA with a Stable outlook to the Dormitory Authority of the State of New York (DASNY) State Sales Tax Revenue Bonds, Series 2024A (Tax-Exempt).
Key Credit Considerations
The rating was assigned because of the following key credit considerations:
Credit Positives
- Provisions of the Enabling Act and the importance of sales tax revenues to state operations mitigates the risk of legislative non-appropriation of financing agreement payments or a failure to pay such payments when due after amounts have been appropriated and set aside in the Sales Tax Revenue Bond Tax Fund (STRBTF).
- STRBTF Receipts provide ample historical and projected coverage of maximum annual debt service.
- Overleveraging of the revenue stream is unlikely given the strong 2.0x additional bonds test, as well as the State’s reliance on excess sales tax revenues for operations.
- The potential for a diversion in the flow of STRBTF Receipts in the event of a budgetary delay or a severe fiscal distress, while not non-existent, is extremely remote, in KBRA’s view.
Credit Challenges
- Financing agreement payments are subject to annual appropriation and executory only to the extent of amounts available in the STRBTF.
- Sales tax receipts are inherently sensitive to cyclical economic conditions, demographics, inflation, financial market volatility, and exogenous events such as recessions and pandemics.
Rating Sensitivities
For Upgrade
- Not Applicable
For Downgrade
- A trend of declining debt service coverage that approaches the 2.0x ABT level.
- A failure by the State legislature to annually appropriate amounts required to make financing agreement payments.
- Action by the State to amend, repeal or alter statutes relating to the State Sales Tax or the State Sales Tax Revenue Bond Financing Program that negatively impact revenues available for financing agreement payments.
To access rating and relevant documents, click here.