Rating remains under review for possible downgrade due to outsized pension liability for current rating category
New York, May 07, 2013 --
Moody's Rating
Issue: General Obligation Unlimited Tax Refunding Bonds, Series
2013A (Tax-Exempt); Rating: Aaa; Sale Amount:
$16,820,000; Expected Sale Date: 05-17-2013;
Rating Description: General Obligation
Issue: School Improvement Unlimited Tax Refunding Bonds, Series
2013B (Federally Taxable); Rating: Aaa; Sale Amount:
$3,935,000; Expected Sale Date: 05-17-2013;
Rating Description: General Obligation
Opinion
Moody's Investors Service has assigned a Aaa rating to Mason City
School District's (OH) $16.8 million General Obligation
Unlimited Tax Refunding Bonds, Series 2013A (Tax-Exempt)
and $3.9 million General Obligation Unlimited Tax Refunding
Bonds, Series 2013B (Federally Taxable). Post-sale,
the district has $107.3 million of outstanding long term
general obligation debt, all of which carries a Moody's rating
of Aaa. In addition, the district holds $7.9
million of outstanding bond anticipation notes (BANs) that mature on January
30, 2014 and carry a Moody's short term rating of MIG1.
SUMMARY RATINGS RATIONALE
The Series 2013A and Series 2013B bonds are secured by the district's
general obligation unlimited tax pledge. Proceeds from the Series
2013A bonds will be used to advance refund a portion of the district's
outstanding School Improvement Unlimited Tax General Obligation Bonds,
Series 2007 for restructuring purposes and for estimated net present value
savings. The Series 2007 bonds were voter approved in May 2007
for the purpose of construction, additions, renovations and
improvement to school facilities. Proceeds from the Series 2013B
bonds will be used to advance refund a portion of the district's
outstanding General Obligation Unlimited Tax Refunding Bonds, Series
2005 for restructuring purposes and for estimated net present value savings.
The assignment of the Aaa rating reflects the district's sizeable,
residential tax base benefiting from its proximity to the Cincinnati (GO
rated Aa1/rating under review for possible downgrade) metro area;
healthy financial operations supported by sound reserves; above average
socioeconomic characteristics; and an above average debt burden with
no plans to take on additional long term borrowing.
The district's credit rating remains under review for possible downgrade
due to its Moody's-determined outlier status for its rating
category for pension obligations. We expect to resolve the review
by the end of July 2013. For further detail please see the April
17, 2013 release of "Moody's announces new approach
to analyzing state, local government pensions; 29 local governments
placed under review."
STRENGTHS
• Healthy General Fund cash reserves
• Sizable, residential tax base in the Cincinnati metro area
• Above average socioeconomic characteristics
CHALLENGES
• Plans to spend down cash reserve levels over the medium to long
term
• Outsized pension obligations relative to the district's operating
budget for the current ratings category
OUTLOOK
On April 17, 2012, Moody's placed Mason City School District's
(OH) rating on review for possible downgrade in conjunction with our adopted
pension adjustments and as a result of the districts large liability relative
to revenues, compared to similar credits within the same rating
category. We are currently reviewing the district's pension
liabilities within the context of its entire credit profile. We
expect to resolve the review by the end of July 2013.
What Could Move The Rating Down
• Erosion of the district's tax base and/or falling socioeconomic
indicators
• Rapid enrollment declines
• Material declines in reserves and/or liquidity to levels inconsistent
with the current ratings category
• Outsized pension liabilities relative to current rating category
RATING METHODOLOGY USED
The principal methodology used in this rating was General Obligation Bonds
Issued by US Local Governments published in April 2013. 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 certain 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 certain 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 certain 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.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Andrew Thomas Van Dyck Dobos
Associate Analyst
Public Finance Group
Moody's Investors Service
100 N Riverside Plaza, Suite 2220
Chicago, IL 60606
U.S.A
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Rachel Cortez
Vice President - Senior Analyst
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 assigns Aaa rating to Mason City School District's (OH) General Obligation Unlimited Tax Refunding Bonds, Series 2013A (Tax-Exempt) and Series 2013B (Federally Taxable)