OREANDA-NEWS. Fitch Ratings affirms approximately \$32.3 million of outstanding New York City Industrial Development Agency (IDA) bonds, series 2006, issued on behalf of the Young Men's Christian Association of Greater New York (YMCA-NY or the association) at 'BBB+'.

The Rating Outlook is Stable.

SECURITY

The IDA bonds are an unsecured, general obligation of the YMCA-NY.

KEY RATING DRIVERS

OPERATIONAL STABILITY: Fitch's affirmation of the 'BBB+' rating reflects the association's positive operating margin for fiscal 2013 and preliminary results for fiscal 2014 coupled with relative stability in its unrestricted balance sheet resources.

MEMBERSHIP REVENUES SUPPORT FLEXIBILITY: YMCA-NY's growing membership base is sizeable and widespread, relative to the city's geography. This diversity offsets the association's moderate reliance upon revenues related to either of the residence programs (18.2% of fiscal 2013 revenues) or governmental payors (14.2% of fiscal 2013 revenues).

MANAGEABLE DEBT METRICS: The association's maximum annual debt service (MADS) burden constituted 4.2% of unrestricted operating revenues based on fiscal 2014 unaudited operating results, which Fitch considers moderate, and adequate pro forma MADS coverage of 2.7x.

STEADY FUNDRAISING CAPABILITIES: YMCA-NY's sound fundraising culture and strong management team tap into a loyal donor base to boost campaigns that focus on upgrading or replacing aging facilities while expanding new branches of the association to underserved communities.

RATING SENSITIVITIES

SUSTAINED OPERATING MARGINS: Fitch expects gradual operating improvement to continue in fiscal 2015, leading to continued operating surplus and growth in financial resources over the next several years. Sustained positive operating margins could potentially result in positive rating action for YMCA-NY.

ADDITIONAL LEVERAGE: Incurrence of additional debt beyond what is currently being contemplated, without a commensurate increase in available financial resources or sustained operating improvement, could stress the association's current financial cushion.

CREDIT PROFILE

The YMCA-NY is a not-for-profit, community service organization offering education, recreation and health programs to over 500,000 children and adults. The association is the largest YMCA in the country and the largest private youth-serving agency in the city of New York (the city, general obligation [GO] bonds rated 'AA' by Fitch). YMCA-NY programs and services are offered currently at 22 full-service branches throughout the city's five boroughs, most of which are owned by the association. Select programs and services are offered at schools and community centers. Branch membership and residence services provide nearly 80% of the association's revenues and governmental payor reliance is lower than would be expected for an organization that offers as extensive a continuum of program offerings.

Governmental payor contracts with the city and state of New York (the state, GO bonds rated 'AA'), inched up incrementally in fiscal 2013 to 14.2% and 15% in fiscal 2014 according to preliminary financials. These generally breakeven contracts reimburse the association for expenses associated with specific programs. This corresponding relationship (expense to reimbursement) enables operational stability when funds are redirected. And, a reduction in the aforementioned contracts would only marginally affect the wherewithal of the association since related costs would likely be reduced to match the funds received.

In November 2014, YMCA-NY announced the retirement of President and CEO Jack Lund, effective on June 30, 2015, after a decade in the leadership position. A national search is currently under way and a nomination for the post is likely by May 2015. Moreover, although management at the association does not believe the new President and CEO would markedly alter the established strategic vision and mission of YMCA-NY, Fitch will continue to monitor any shifts in focus for the organization.

CONTINUALLY STRONG FINANCIAL METRICS

Service line improvement for fiscal 2013 over 2012 (illustrated by a 4.4% increase in membership revenue and program fees as well as a 3.2% increase residence revenue) - coupled with rising governmental contract related revenue - indicate a strong financial position (evidenced by a 1.6% operating margin) for the association. Using preliminary results provided by YMCA-NY, Fitch calculated a positive margin of 2.0% for fiscal year end (FYE) 2014 supported by even stronger year-over-year growth in membership, residence, and governmental contract related revenues. The association attributes robust financial performance in 2013 and 2014 partly to traditional marketing efforts to augment membership units (up 2.3% in 2013 and 7.1% in 2014) as well as social media marketing to boost residential revenues.

YMCA-NY's operations, although still positive, dipped year over year with net income available for debt service of about \$18.5 million in fiscal 2013, a 9% decrease from \$20.4 million in 2012. Still, Fitch notes that this positive cash flow has served to strengthen financial resources whereby available funds, equal to cash and investments not restricted, remained steady and totaled \$56.2 million for fiscal 2013. These available funds constituted 35.2% of fiscal 2013 operating expenses (\$159.7 million) and 63% of total long term debt (\$89 million). Preliminary results for fiscal 2014 indicate available funds as 34.2% of FYE 2014 operating expenses (\$167.6 million) and 67% of total long term debt (\$85.6 million). Fitch favorably views the association's ability to maintain its available financial resources and sustain positive operations since fiscal 2012.

YMCA-NY's total investment pool, of which available funds is a subset, is primarily invested in traditional domestic equity and fixed income instruments. Fitch views positively that the pool is highly liquid, as the association's operating profile may require potential, periodic need to rely upon balance sheet resources.

LOYAL FUNDRAISING BOOSTS CAPITAL NEEDS

Fundraising is managed centrally at YMCA-NY, although branches do conduct funding campaigns individually. Management reported that the association's Next Century capital campaign - with a goal to raise \$8 million - resulted in \$8.9 million in commitments, of which \$8.2m represent payments received. The campaign's goal was to raise funds for upgrading or replacing aging facilities while expanding new branches to underserved communities. Results from fundraising efforts include the opening of the Prospect Park aquatic park in Summer 2014 as well as bolstering efforts to expand the YMCA-NY network to Rockaway, Queens and Coney Island, Brooklyn. Gifts and contributions remained relatively steady at 4.7% of total revenues for fiscal 2013 (down from 5% one year prior). Currently, YMCA-NY keeps track of more than 10,000 donors in total, with the number of major donors (i.e. those donating \$1,000 or more) increasing.

MANAGEABLE DEBT BURDEN

No significant capital improvement plans through the intermediate term and a newly contemplated capital improvement campaign could bolster the association's liquidity profile in the coming years. Outstanding debt, including revenue bonds, capital leases, non-cancellable operating leases, notes, and lines totals \$85.6 million, down from about \$89 million in fiscal 2013. MADS is equal to \$7.3 million and is covered 2.7x by net available revenues from operations. Moreover, in conjunction with the potential refunding of debt in the near term, YMCA-NY has proposed, though not fully approved, modest debt plans for capital maintenance. Fitch views this as a manageable debt position for the association.