Moody's Rating

Issue: Future Tax Secured Subordinate Bonds, Fiscal 2013 Series C, Tax Exempt Subseries C-1; Rating: Aa1; Sale Amount: $100,000,000; Expected Sale Date: 11/15/12; Rating Description: Special Tax: Non-Sales/Non-Transportation

Issue: Future Tax Secured Subordinate Bonds, Fiscal 2013 Series C, Taxable Subseries C-2 (Qualified School Construction Bonds); Rating: Aa1; Sale Amount: $100,000,000; Expected Sale Date: 11/15/12; Rating Description: Special Tax: Non-Sales/Non-Transportation

Issue: Future Tax Secured Subordinate Bonds, Fiscal 2013 Series C, Taxable Subseries C-3; Rating: Aa1; Sale Amount: $130,000,000; Expected Sale Date: 11/15/12; Rating Description: Special Tax: Non-Sales/Non-Transportation

Issue: Future Tax Secured Subordinate Bonds, Fiscal 2013 Series D; Rating: Aa1; Sale Amount: $307,545,000; Expected Sale Date: 11/15/12; Rating Description: Special Tax: Non-Sales/Non-Transportation

Issue: Future Tax Secured Subordinate Bonds, Fiscal 2013 Series E; Rating: Aa1; Sale Amount: $217,285,000; Expected Sale Date: 11/15/12; Rating Description: Special Tax: Non-Sales/Non-Transportation

Opinion

Moody's Investors Service has assigned Aa1 ratings to the New York City Transitional Finance Authority's$100 million Future Tax Secured Subordinate Bonds, Fiscal 2013 Series C, Tax Exempt Subseries C-1; $100 million taxable Subseries C-2 (Qualified School Construction Bonds); $130 million taxable Subseries C-3; $307.5 million Future Tax Secured Subordinate Bonds, Fiscal 2013 Series D; and $217.3 million Future Tax Secured Subordinate Bonds, Fiscal 2013 Series E. Proceeds of the Series C bonds will be used to finance portions of the city's capital plan. Proceeds of Series D and E will be used to refund outstanding bonds for savings. The bonds are scheduled to price on November 15. We also will assign a Aa1 rating to $32.6 million of Fiscal 1999 Subseries A-1, which are being converted to fixed rate mode from variable rate mode and reoffered as subordinate lien bonds. The conversion is scheduled to occur on December 4 and the rating will be effective on that date.

SUMMARY RATING RATIONALE

TFA's senior lien bonds are rated Aaa and its subordinate lien bonds are rated Aa1. The ratings reflect the high debt service coverage provided by the pledge of New York City personal income tax and sales tax revenues, a strong legal structure that insulates TFA from potential city fiscal stress (New York City general obligation bonds rated Aa2 with a stable outlook), the open subordinate lien that permits future leverage of the pledged revenues, and New York State's (rated Aa2 with a stable outlook) ability to repeal the statutes imposing the pledged revenues. The outlook is stable.

STRENGTHS

-- Strong legal and structural insulation from city fiscal stress

-- High debt service coverage provided by a broad stream of pledged revenues, New York City's personal income and sales taxes, and the healthy historical performance of those sources

CHALLENGES

-- The state retains the right to alter or repeal the statutes imposing the taxes pledged to the bonds

-- The cyclicality of the personal income tax, particularly as it relates to New York City's financial services industry, and more recent volatility in the sales tax

-- The indenture's open lien for subordinate bonds, which could reduce coverage, although issuance is subject to an additional bonds test requiring 3 times coverage of maximum annual debt service

OUTLOOK

The rating outlook of the TFA's Future Tax Secured Bonds is stable. Strong legal and structural payment mechanisms help to insulate the bonds from city and state fiscal stress, including short-term liquidity strain. Even amid current economic weakness, coverage of MADS remains strong, although new ability to leverage the pledged revenues could dilute that going forward.

WHAT COULD MAKE THE RATING GO UP

-- A higher additional bonds test or other indenture provision increasing bondholder protections against possible dilution of coverage

WHAT COULD MAKE THE RATING GO DOWN

-- Significant weakening of the pledged revenues that reduces currently high levels of coverage

-- Large additional bond authorizations that materially dilute coverageThe principal methodology used in this rating was US Public Finance Special Tax Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Nicholas E Samuels VP - Senior Credit Officer Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Nicole Johnson Senior Vice President Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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