TEXT-Fitch rates New York City TFA building aid revs 'AA-'

July 9 - Fitch Ratings has assigned an 'AA-' rating to the following New
York City Transitional Finance Authority (TFA) bonds:

--$850,000,000 fiscal 2013 series S-1 building aid revenue bonds.

The bonds are scheduled to be sold through negotiation the week of July 9, 2012.

In addition, Fitch has affirmed the 'AA-' rating on $5.3 billion outstanding TFA
building aid revenue bonds.

The Rating Outlook is Positive.

The issuance of the fiscal 2013 series S-1 bonds does not affect the 'AAA'
rating on the TFA's future tax secured bonds.

SECURITY

The bonds are payable from annual New York State appropriations of building aid
to New York City.

KEY RATING DRIVERS

--LINK TO NEW YORK STATE CREDIT: School building aid that secures the bonds
requires annual state legislative appropriation. Therefore, the rating is linked
to the general obligation (GO) credit of the State of New York, currently rated
'AA' with a Positive Outlook by Fitch.

--STRONG STATE SUPPORT OF EDUCATION: Appropriation risk is minimal given the
constitutional mandate for, and strong history of, state support for education.

--STRUCTURAL PROTECTIONS STRENGTHEN CREDIT: The additional bonds test (ABT)
relies only on projects that already have been approved, although revenue
related to future projects also is pledged. Monies for debt service are retained
in the city fiscal year prior to the year in which the debt service is due.

WHAT COULD TRIGGER A RATING ACTION

--Changes in New York state's GO rating, to which this rating is linked.
--A material change to the state's funding of school building aid that weakens
credit quality.

CREDIT PROFILE
The rating is based on the credit quality of the State of New York (GO bonds
rated 'AA' with a Positive Outlook), as bonds are payable from annual state
appropriations of building aid. State building aid assists local school
districts across the state with the cost of constructing and improving
elementary and secondary education facilities. Appropriation risk is minimal
given the constitutional mandate for, and strong history of, state support for
education. Moreover, the ABT only considers aid associated with projects that
have already been approved by the State of New York, even though aid related to
projects that will be approved by the state in the future is also pledged to the
bonds.

In the 2006 state legislative session, the TFA was authorized to issue an amount
of up to $9.4 billion outstanding for education. As permitted by the
legislation, the city assigned all of its state building aid to the TFA to
secure the bonds.

State building aid, which is earned on an individual project basis, consists of
confirmed building aid and incremental building aid. Confirmed building aid
refers to aid payable for projects that have already been approved by the state.
Such aid is subject to annual state appropriation but is not subject to any
additional statutory or administrative conditions or approvals. The state has
covenanted that the calculation of reimbursable costs for a project will not
change once the project has been approved. The level of reimbursement can change
over time pursuant to a statewide formula that is calculated every year, but
this ratio has been relatively stable over time. Incremental building aid refers
to state building aid to be received for projects approved by the state in the
future.

Both confirmed and incremental building aid, are the property of the TFA and are
pledged to the bonds. However, the ABT considers only confirmed building aid. In
order for additional debt to be issued, confirmed building aid payable in the
fiscal year preceding each year in which bonds are scheduled to be outstanding
must be at least 1 times (x) debt service in that year. Since state building aid
for a given project is provided over 30 years, debt service coverage by
confirmed building aid drops from 2.1x in fiscal 2013 to 1.01x in fiscal 2036.
Fitch expects that the incremental building aid generated by the city's ongoing
education capital program will result in substantially higher actual coverage in
the out years. The average state reimbursement rate for education projects in
the city is about 50%, and the TFA receives all building aid regardless of
whether the project is financed with TFA building aid bonds or through a
different financing mechanism.

State building aid is retained for debt service each year, when the amount of
building aid left to be received before the end of the city's fiscal year equals
110% of the debt service payable on the building aid bonds in the following city
fiscal year. Although the state's fiscal year runs from April-March, the state
budgets education aid, which includes building aid, based on the city's
fiscal/school year (July - June). The retention mechanism is likely to trap
building aid in the March through June period for debt service payments in the
following July and January. Building aid not required to be retained flows to
the city. Although in the recession there were declines in education aid paid by
the state to the city as well as delays in the timing of education aid payments,
building aid continued to increase and be paid as expected.

Pursuant to the TFA indenture, since building aid is TFA revenue it must be
available first to TFA future tax secured bonds issued prior to the first
issuance of building aid revenue bonds in fiscal 2007. Given the very strong
coverage that the pledged personal income and sales tax revenues provide for
future tax secured bonds, it is very unlikely that building aid would ever be
needed for this purpose. TFA future tax secured bonds sold after the date of the
initial issuance of the building aid bonds have no claim on building aid. There
is currently $5.4 billion in TFA future tax secured debt outstanding that was
sold prior to the first issuance of building aid revenue bonds.

In addition to previously outstanding TFA future tax secured bonds, the payment
of building aid is also subject and subordinate to certain other limited prior
statutory and state constitutional claims. Fitch does not believe that these
will impair the ability to pay debt service. Holders of the TFA building aid
bonds benefit from the statutory covenants in the original TFA Act prohibiting
action that would impair bondholders and the bankruptcy-remote nature of the
issuer. However, since the pledged revenue stream requires annual state
appropriation, the bondholders do not enjoy the same insulation from government
operations that is a key factor in the 'AAA' rating of the TFA future
tax-secured bonds.

For more information on the state's general credit, see Fitch's press release
'Fitch Affirms New York State GO Bonds at 'AA'; Outlook Positive' dated June 11,
2012, available on the Fitch web site at 'www.fitchratings.com'.

Contact:

Primary Analyst
Laura Porter
Managing Director
+1-212-908-0575
Fitch, Inc.
One State Street Plaza
New York, NY 10004

Secondary Analyst
Douglas Offerman
Senior Director
+1-212-908-0889

Committee Chairperson
Karen Krop
Senior Director
+1-212-908-0661

Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email:
elizabeth.fogerty@fitchratings.com.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 15, 2011);
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 15, 2011).

Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria

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