Unlimited Tax General Obligation Refunding Bonds, Series 2011
Expected Sale Date
NEW YORK, Jul 29, 2011 -- Moody's Investors Service has assigned an initial A2 rating to the
Whitman County Public Hospital District No. 1A (Pullman Regional
Hospital) Unlimited Tax General Obligation and Refunding Bonds, 2011 expected to
be issued in the amount of approximately $4.0 million. The current offering is
secured by the district's full faith, credit, and unlimited property tax pledge.
Proceeds will be used to refund portions of the district's outstanding Series
2001 and 2002 unlimited tax G.O. debt for annual debt service savings.
The A2 limited tax G.O. rating primarily reflects the
district's moderately-sized tax base with an institutional presence, stable
financial performance with strong liquidity, and below average debt levels.
-Growing tax base with institutional presence
-Stable operations with strong liquidity
-Low debt burden
-Moderately-sized tax base
-Below-average socioeconomic indicators
-Narrow operating margins
DETAILED CREDIT DISCUSSION
DISTRICT SERVES THE CITY OF PULLMAN; STRONG INSTITUTIONAL PRESENCE
The hospital district is coterminous with the city of Pullman (Aa3 GO rating)
located approximately 76 miles south of Spokane, in Whitman County in eastern
Washington, and serves a population of approximately 30,000. The local economy
is centered around agriculture and timber production, and anchored by the
presence of a Washington State University campus. The district was originally
established and designed as a small private operation to meet the health needs
of the students, and has since grown through a series of expansions including
additions and reconstruction of the facility.
The district's assessed value (AV) increased an average of 6.0% annually between
2007 and 2011, including an above average increase of 13.2% in 2009. The 2011 AV
nonetheless remained a relatively small $1.3 billion. Going forward the 2012 AV
is expected to be flat relative to 2011. Top ten taxpayers comprise a moderate
11.2% of 2011 AV, with the top taxpayer being Schweitzer Engineering at 4.2%.
Residential construction is expected to remain slow in the near term with
limited commercial activity.
According to the 2000 census, Whitman County wealth levels were below state
averages with per capita and median family income levels at 58.9% and 85.9% of
state levels, respectively. The low per capita income figure is typical of
cities with a predominance of college students.
MODERATE REVENUE BASE WITH STABLE OPERATING PERFORMANCE; STRONG LIQUIDITY
The 25-bed 'critical access' hospital district serves a population of
approximately 30,000, of which approximately 18,000 are students. Management
notes the closest hospital offering similar services is 8 miles away and across
state lines in Idaho, and is not considered a competitor. The primary
competition comes from hospitals in Spokane, which offer additional medical
services such as cardiac care. While these facilities currently do not
directly compete with the district, it is conceivable that they may do so at
some future date which in turn could be detrimental to the district's credit.
Although the district is licensed to operate 42 beds, management decided to
retain the 'critical access' designation in order to maintain its operational
efficiencies and higher margins.
Pullman Regional Hospital had total inpatient admissions in FY 2010 of 1,443
after two consecutive years of declines. However, during those years outpatient
services increased. Management indicates relatively stable inpatient admissions
for the first six months of FY 2011, recognizing that admissions fluctuate
throughout the year as a result of the high student population that the district
serves. The district's payor mix is favorable and has remained relatively
stable over the last few years and is comprised of commercial payors and
Blue Cross (59%), Medicare (31%), and Medicaid (5%).
Fiscal year 2009 total operating revenues were $40.3 million, continuing a trend
of increased results relative to prior years. Fiscal 2010 was also the first
year to include the consolidated financial information for the Pullman Regional
Hospital Network LLC, which owns and operates the district's physician
practices. Operating cash flow was down slightly in FY 2010 at $3.3 million
(7.3% cash flow margin) from $3.5 million (8.5% margin) in FY 2009. Based on
management's prepared interim statements and the annual budget, fiscal 2011
operating results are projected to remain stable through the year, with ending
fund balance expected to increase by approximately $444,000. The
district's sound and stable financial performance is key to the rating,
particularly given its small size which renders it vulnerable to unanticipated
Unrestricted liquidity grew to $13.1 million at fiscal 2010, resulting in 110
days cash on hand compared to $7.4 million (69 days) at FYE 2009. The district's
liquidity is a strong credit positive which has been considered in the rating.
The district participates in the Washington State Local Government Investment
Pool and funds are primarily invested in cash and US government treasuries and
The district continues to only levy an excess property tax levy for
general operations and payment of debt service on unlimited general
obligation bonds. For 2011 the excess levy ($0.49), totaled $647,541. Moody's
notes that even if AV declines the district has ample capacity to increase its
regular levy rate in order to generate a maximum 1% increase in property tax
revenues over prior year collections, as allowed under Initiative 747. The
district does not levy a regular property tax or emergency medical services
levy, and would need to receive voter approval to do so.
BELOW AVERAGE DEBT BURDEN; NO PLANS FOR ADDITIONAL BORROWING IN THE NEXT THREE
TO FIVE YEARS
Proceeds will be used to refund previously issued limited tax G.O. debt for
annual debt service savings. The current sale is secured by the full faith and
credit of the district including a limited ad valorem property tax pledge. The
district's direct burden is below average, at 0.4% due to previously issued
voter-supported unlimited tax G.O. bonds. The overall debt burden is also low at
1.8%, primarily due to overlapping school district debt. The district also has
revenue bonds outstanding in the approximate amount $15.0 million, and has
maintained healthy debt service coverage at 1.9x. Management does not have plans
to issue additional debt in the near-term.
What could make the rating move - UP
-Significant improvement in resident socioeconomic indicators
-Significant, prolonged increase in assessed valuation
What could move the rating - DOWN
-Deterioration of financial operations, including liquidity
-Entrance of competitive healthcare provider within the district service area
Service area population: 30,000
2011 full valuation: $1.3 billion
Average annual growth in AV, 2007 to 2011: 6.0%
Direct debt burden: 0.4%
Overall debt burden: 1.8%
Total beds: 25 (licensed for 42)
Total operating revenues: FY 2009; FY 2010: $40.3 million; $44.0 million
Days cash on hand: FY2009; FY2010: 69; 110
The principal methodology used in this rating was 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 this methodology.
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, parties not involved in the ratings, public
information, confidential and proprietary Moody's Investors Service 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 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.
Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Matthew A. Jones
Senior Credit Officer
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S ASSIGNS A2 RATING TO THE WHITMAN COUNTY PUBLIC HOSPITAL DISRICT NO. 1A (PULLMAN REGIONAL), WA, UTGO REFUNDING BONDS; AFFECTS APPROXIMATELY $4.0 MILLION IN G.O. DEBT
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007