Downgrade to Aa3 rating applies to $164.0 million of post-sale long-term general obligation debt
New York, May 06, 2013 --
Moody's Rating
Issue: General Obligation Refunding Bonds Series 2013-A;
Rating: Aa3; Sale Amount: $24,260,000;
Expected Sale Date: 5-7-2013; Rating Description:
General Obligation
OPINION
Moody's Investors Service has downgraded to Aa3 from Aa2 the City
of Topeka's (KS) underlying general obligation rating and removed
the stable outlook. Concurrently, Moody's has assigned
a Aa3 rating to the city's General Obligation Refunding Bonds,
Series 2013-A. Post-sale, the city will have
$164.0 million of long-term general obligation debt
outstanding.
SUMMARY RATINGS RATIONALE
The bonds are secured by the city's general obligation unlimited
tax pledge. Proceeds of the bonds will refund portions of the city's
outstanding General Obligation Bonds, Series 2008-A,
Series 2009-A and Series 2009-B for estimated net present
value savings. The savings will be collected up front and used
to improve the city's reserves in fiscal 2014 by shifting a portion
of the debt service levy to the General Fund while recognizing the savings
in the debt service fund. The Aa3 rating reflects the city's
relatively stable economy anchored by its status as the state capital;
trend of operating deficits that have resulted in narrowed reserve levels
with continued pressure over the near term; and above average debt
burden which is expected to moderate over the long term.
STRENGTHS
-State capital serves as regional economic center
-New management team has identified improved fund balance target
to be achieved over next five years
CHALLENGES
-Lowered reserve levels due to significant operating deficits in
fiscals 2011 and 2012 (unaudited)
-Dependence on economically sensitive sales tax revenue streams
for operations
WHAT COULD CHANGE THE RATING - UP
-Substantial growth in the city's tax base and improvement
in residential income indices
-Sustained improvement in reserves to levels consistent with higher
ratings
WHAT COULD CHANGE THE RATING -- DOWN
-Significant tax base valuation declines or erosion of the city's
residential income profile
-Further narrowing of reserve levels due to operational imbalance
PRINCIPAL 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.
Thomas Aaron
Analyst
Public Finance Group
Moody's Investors Service, Inc.
100 N Riverside Plaza
Suite 2220
Chicago, IL 60606
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Jeffery Yorg
Asst Vice President - 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 downgrades to Aa3 from Aa2 City of Topeka's (KS) underlying general obligation rating and removes stable outlook; Aa3 rating assigned to $24.3 million General Obligation Refunding Bonds, Series 2013-A