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Rating Update:

MOODY'S AFFIRMS THE Aa1 RATING ON THE WASHINGTON AND MULTNOMAH COUNTIES S.D. NO. 48J (BEAVERTON), OR, GENERAL OBLIGATION BONDS; CONCURRENTLY REMOVES NEGATIVE OUTLOOK

11 Feb 2011

Aa2 FULL FAITH AND CREDIT OBLIGATIONS ALSO AFFIRMED

Primary & Secondary Education
OR

Opinion

NEW YORK, Feb 11, 2011 -- Moody's Investors Service affirms the Aa1 and removes the negative outlook of the underlying rating on the Washington and Multnomah Counties School District No. 48J (Beaverton), Oregon, General Obligation Bonds outstanding in the amount of approximately $371.6 million. The bonds are secured by the district's unlimited property tax pledge. At this time, Moody's also affirms an Aa2 rating and removes the negative outlook on the district's Full Faith and Credit Obligations, Series 2009 in the approximate amount of $24 million.

RATING RATIONALE

The rating assignments are primarily based on the district's sizeable tax base, above average wealth indices, and manageable debt burden. The removal of the negative outlook reflects the district's improved financial operations and its ability and willingness to make appropriate budgetary actions to stabilize reserves.

STRENGTHS

- Large tax base

- Above average wealth indices

- Satisfactory financial operations

WEAKNESSES

- Majority of revenue from declining state sources

- Limited revenue generating capacity

DETAILED CREDIT DISCUSSION

LARGE AFFLUENT TAX BASE HAS STABILIZED

Moody's believes that the Portland area economy has stabilized, although some economic challenges remain. As of fiscal year (FY) 2011 the district's assessed value ( AV) increased 2.9% to $22 billion, while real market value (RMV) declined by 5.4% to $31.3 billion. The $9.3 billion difference between AV and RMV provides a satisfactory buffer from economic declines, given the state's set 3% residential AV growth designated by Measure 50. The district's tax base benefits from major technology and manufacturing companies located within the district. The largest tax payer, Intel Corporation, recently announced its plans to build a new facility and remodel two others within the district. Moody's believes entities in the high-tech sector should partially offset state government spending cuts, which will likely result in layoffs, furloughs, or shorter workweeks.

The district serves the communities of Beaverton (GO rated Aa1), Portland (GO rated Aaa with stable outlook), Hillsboro (Issuer rating Aa2), and Tigard (GO rated Aa2). According to the 2000 census, wealth levels are amongst the highest compared to all other Oregon school districts with per capita and median family incomes at 127.99% and 131.1% of state levels, respectively. AV per capita of $124,144 is healthy and above the national school district median.

IMPROVED RESERVES AND CONSERVATIVE FINANCIAL OPERATIONS; LOSS OF FEDERAL FUNDING AND REDUCED STATE FUNDING REMAIN A NEAR-TERM CHALLENGE

The district has overcome challenging financial operating pressure and increased its reserves to a satisfactory level. Following several years of General Fund operating deficits, the district ended FY 2009 with a surplus of $7.5 million, and continued the trend in FY 2010 with a $9.3 million surplus. The district's General Fund balance has been rebuilt from a narrow position of $9.7 million in FY 2008, 3.4% of General Fund revenue, below the board's policy of 5%. In FY 2009 the General Fund balance grew to $17.2 million, 5.4% of General Fund revenues, and to $26.5 million in FY 2010, 9.4% of General Fund revenues. These levels better match the district's historic levels and compare favorably to other large school districts in the region.

The district's financial challenges have been managed with expenditure reductions that include the elimination of teaching and administrative positions, restricted spending policies, and employee concessions on existing contracts. In FY 2009 General Fund expenditures slowed to 0.3% growth over the previous year, and FY 2010 expenditures shrunk by 3.2%. Moody's believes the district's timely management of financial pressures and rebuilt reserve levels are credit positives and contribute to the district's rating level.

During FY 2009 and 2010 the district received a total of $16.3 million in Federal funding from the American Recovery and Reinvestment Act (ARRA), and an estimated $7.3 million in FY 2011 from the Federal Education Jobs bill. These one-time funds replaced much of the reduced revenue from state sources in those years. While the state biennial budget for FY 2012 and 2013 is not yet approved, the district has developed plans to accommodate the eliminated Federal funds, and further possible reductions in state funding. The district reports that it does not intend to lower its General Fund balance below its board-mandated level of 5%, and will seek long-term expenditure reductions. Based on the district's recent commitment to reducing expenditures, Moody's believes the district will likely continue its pattern of fiscal prudence. However, if fund balances deteriorate the district's rating could experience rating pressure.

AVERAGE AND MANAGEABLE LEVEL OF DEBT

Moody's expects the district's debt levels to remain manageable. The district's debt position is average relative to similarly rated national school districts with direct and overall debt burdens of 1.2% and 1.7%, respectively; direct debt, including pension obligation bonds and full faith and credit obligations, is 1.7%. Moody's believes that the district's debt position will remain at manageable levels, given no plans to seek additional bond authorization from voters in the next three years.

What could move the rating-UP

- Significantly improved and sustained reserve levels

- Growth and diversification of tax base

What could move the rating-DOWN

- Narrowing reserve levels

- Deterioration of tax base

- Unsustainable financial operations

KEY STATISTICS

2009 estimated population: 252,293

1999 per capita income: $28,787 (127.9% of state median)

1999 median family income: $63,839 (131.1% of state median)

2011 full market valuation: $31.3 billion

2011 full market valuation per capita: $124,144

2010 direct debt burden, net of Pension Obligation Bonds: 1.2%

2010 direct debt burden, including Pension Obligation Bonds: 1.7%

2010 overall debt burden, net of Pension Obligation Bonds: 1.7%

Payout of principal (10 years): 61.7%

FY 2010 General Fund balance: $38.9 million (9.1% of General Fund revenues)

The last rating action was on February 27, 2009 when an underlying Aa2 rating and negative outlook was assigned to Washington and Multnomah Counties School District No. 48J (Beaverton), Oregon.

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009.

REGULATORY DISCLOSURES

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

Moody's Investors Service considers the quality of information available on the credit satisfactory for the purposes of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service 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 the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Analysts

Julian Metcalf
Analyst
Public Finance Group
Moody's Investors Service

Bryan A. Quevedo
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service
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New York, NY 10007
USA

MOODY'S AFFIRMS THE Aa1 RATING ON THE WASHINGTON AND MULTNOMAH COUNTIES S.D. NO. 48J (BEAVERTON), OR, GENERAL OBLIGATION BONDS; CONCURRENTLY REMOVES NEGATIVE OUTLOOK
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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