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Rating Action:

MOODY'S REVISES DISTRICT OF COLUMBIA G.O. RATING OUTLOOK TO NEGATIVE FROM STABLE; ASSIGNS MIG 1 RATING TO $820 MILLION OF TAX REVENUE ANTICIPATION NOTES

Global Credit Research - 20 Sep 2011

Aa2 RATINGS AFFIRMED ON $2.8 BILLION OF OUTSTANDING G.O. BONDS AND Aa3 RATINGS ON $245 MILLION CERTIFICATES OF PARTICIPATION

New York, September 20, 2011 -- Moody's Rating

Issue: Fiscal Year 2012 General Obligation Tax Revenue Anticipation Notes; Rating: MIG 1; Sale Amount: $820,000,000; Expected Sale Date: 09/27/2011; Rating Description: Tax Revenue Anticipation Notes

Opinion

Moody's Investors Service has affirmed the Aa2 rating assigned to the District of Columbia's general obligation bonds and revised the outlook to negative from stable. Concurrently, we have assigned a MIG 1 rating to the District's $820 million of Fiscal Year 2012 General Obligation Tax Revenue Anticipation Notes, affirmed the Aa2 ratings assigned to $2.8 billion of outstanding general obligation bonds and affirmed the Aa3 ratings assigned to $245 million of certificates of participation. Proceeds of the full faith and credit notes, scheduled to price on September 27, will be used to fund seasonal cash imbalances in the District's operating accounts during fiscal year 2012, which starts October 1.

SUMMARY RATING RATIONALE

The outlook revision reflects the District's unique exposure, as the nation's capital, to federal government downsizing and the risk that such a downsizing could have on the finances of the District. The Aa2 general obligation rating reflects in part the District's strong institutionalized financial management and its core base of federal employment, which has had a countercyclical affect on its economy through the recent downturn and has benefitted the District's financial position. Going forward, efforts to reduce the federal deficit, including federal workforce reductions and entitlement cuts, could have an outsize impact on the District and its finances. The outlook for the District's income tax secured bonds (rated Aa1) remains stable. The MIG 1 note rating reflects an adequate projected ending cash balance, sound structural legal features that govern timely repayment of the notes, and the District's general obligation credit quality.

STRENGTHS

Historical stability of the local economy, reflecting the core base of federal employment

Strong institutionalized fiscal management features, including independent chief financial officer, five-year financial planning process, self-imposed debt cap, mandated reserves and congressional budget oversight, and dormant "control authority" provisions of federal law

Fully funded pensions and low retiree health care costs

CHALLENGES

Future federal downsizing could have an outsize impact on the District economy and its finances

High government service burden as the District performs the functions of a city, county, school district and state

High unemployment and poverty rates relative to the nation

Constrained ability to access its tax base, due to large proportion of federal and other tax-exempt property, and congressional prohibition on taxing incomes of non-resident commuters

OUTLOOK

The outlook for the District of Columbia's general obligation bonds is negative. We expect that efforts to reduce the federal deficit, including federal workforce reductions and entitlement cuts, could have an outsize impact on the District and its finances.

WHAT COULD MAKE THE RATING GO UP

Rebuilding and maintenance of healthy fund balances

Substantial improvement in the local economy, including more robust population growth, increased resident employment and lower poverty levels

The ability to access currently off-limits portions of the tax base, such as taxing commuter incomes

WHAT COULD MAKE THE RATING GO DOWN

Federal downsizing that has a negative impact on the District's economy and finances, including reductions in the federal workforce or entitlement cuts

Erosion of the district's strong financial management practices, particularly leading to budget imbalance or draw downs of fund balance below adequate levels

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Short-Term Cash Flow Notes published in May 2007. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Nicholas Samuels
Vice President - Senior Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Nicole Johnson
Senior Vice President
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

MOODY'S REVISES DISTRICT OF COLUMBIA G.O. RATING OUTLOOK TO NEGATIVE FROM STABLE; ASSIGNS MIG 1 RATING TO $820 MILLION OF TAX REVENUE ANTICIPATION NOTES
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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