Rating actions affect $672 million of rated debt, including $359 million of pension obligation bonds
New York, February 20, 2013 -- Moody's Investors Service has affirmed Contra Costa County's (CA)
Aa2 Issuer Rating and the A1 ratings on the county's 1999A,
2001A,2002A, 2007A, 2007B, 2010A-1,
2010A-2, 2010A-3 and 2010B Lease Revenue Bonds.
We have also downgraded to A1 from Aa3 the rating on the county's
2001 and 2003 Pension Obligation Bonds.
RATINGS RATIONALE
The ratings reflect the county's large and diverse local economy with
a large and growing service sector and excellent access to the entire
San Francisco Bay Area and Silicon Valley. The rating also incorporates
the county's weak fiscal position relative to similarly rated credits
and the likelihood that it will continue to manage operations to produce
continual improvement to its overall credit profile. The downgrade
to the pension obligation bonds reflects the nature of this type of debt
which is unsecured and paid from any of the county's funds,
pressured by factors which affect financial performance such as steeply
rising service costs.
The pension obligation bonds are an unconditional county obligation payable
from any legally available funds. In the event that the county
fails to make appropriations for the payment of the bonds, the Employees'
Retirement Law of 1937 requires the county auditor to transfer any money
available and any funds in the county treasury to make the necessary payments,
with the transfer having the same force and effect as an appropriation
by the county Board of Supervisors. The transfer must be made within
30 days of the start of a given fiscal year. However, the
county does not have the ability or authority to raise taxes to meet debt
service.
STRENGTHS
Large, diverse tax base
Strong resident wealth levels
Quick payout of general fund and lease obligations
CHALLENGES
Notable but manageable social service burden
Combined lease and pension obligation requirements which are the among
the highest relative to similarly rated credits
Weak fiscal position relative to similarly rated credits
WHAT COULD MAKE THE RATING GO UP
Further bolstering of financial position through rebounding revenues and
expenditure management
Sustained economic and assessed value growth
WHAT COULD MAKE THE RATING GO DOWN
Weakening financial position
Deteriorating socioeconomic factors
RATING METHODOLOGY
The principal methodology used in rating the lease revenue was The Fundamentals
of Credit Analysis for Lease-Backed Municipal Obligations published
in December 2011. The principal methodology used in rating the
issuer level and General Obligation debt were General Obligation Bonds
Issued by U.S. Local Governments published in October 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
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.
Abhishek Narendra Kutnikar
Associate Analyst
Public Finance Group
Moody's Investors Service, Inc.
600 North Pearl Street
Suite 2165
Dallas, TX 75201
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Eric S Hoffmann
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 has affirmed Contra Costa County's (CA) Aa2 Issuer Rating and A1 Lease Revenue Bond ratings; Pension Obligation Bonds' rating downgraded to A1 from Aa3