Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
New Issue:

MOODY'S ASSIGNS Aa1 RATING TO $40 MILLION STATE OF OREGON GENERAL OBLIGATION

Global Credit Research - 15 Sep 2011

OUTLOOK IS STABLE

State
OR

Moody's Rating

ISSUE

RATING

General Obligation Bonds 2011 Series M

Aa1

  Sale Amount

$40,000,000

  Expected Sale Date

10/04/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Sep 15, 2011 -- Moody's Investors Service has assigned a rating of Aa1 with a stable outlook to the State of Oregon's $40 million General Obligation Bonds 2011 Series M. The bonds are expected to sell on or about October 4th. Proceeds will be used to fund various capital projects in the state.

RATINGS RATIONALE

The general obligation rating reflects the state's maintenance of moderate reserve levels during the current economic downturn; effective management of voter initiatives in the context of maintaining budget balance; higher than average unemployment; and a revenue structure that is heavily exposed to volatility in personal income tax collections.

Credit strengths:

-- Sound financial controls underscored by strong executive authority to reduce spending

-- Maintenance of a moderate Rainy Day Fund balance

-- Favorable funding ratios in the state's retirement systems following reforms and pension obligation bond issuance

Credit challenges:

-- Unusually high reliance on economically sensitive personal income taxes creates increased budgetary strain, reflected in large revenue shortfalls in last fiscal year and forecasted declines for the current biennium

-- Constitutional 2% "kicker" that requires refunds of personal and/or corporate income taxes if collections are 2% or greater than the budgeted amount, which adds budgetary challenges, including cash flow pressures

-- Above-average debt ratios

DETAILED CREDIT DISCUSSION

2011-2013 BIENNIUM BUDGET REVISED DOWN BY 1.3%, FORECAST PROJECTS $253 MILLION ENDING FUND BALANCE

During the 2011 legislative session, Oregon adopted a $14 billion general fund budget for the current 2011-2013 biennium. The adopted budget incorporated revenue growth of approximately 12%. The adopted budget did not rely on tax increases or relying on one time resources to balance the budget, with the exception of a transfer of $182 million from the Education Stability Fund for K-12 funding. The legislature included a hold back of 3.5% of all appropriations, with the exception of K-12 funding, to create a budgetary cushion of $460 million. In planning for the biennium the state earmarked $310 million of the cushion to avoid any midyear program reductions that may occur if revenues experienced a decline.

As of the September 2011 revised revenue and economic forecast, the state expects to realize $13.8 billion in general fund revenue, a decline of 1.4% from the adopted budget. The change in the forecast reflects the weakness and uncertainty in the national economy and is not a direct result of changes in actual revenue collections or economic trends within the state. The state now expects to end with a balance of $253 million, which still allows for flexibility in offsetting additional spending reductions that may need to occur. Additionally, as a result in a change to the state's constitution the legislature will now meet annually which allows the legislature time to adjust the budget if necessary in the off year of the biennium.

REPLENISHMENT OF RAINY DAY FUNDS A PRIORITY

During the 2007 legislative session, Oregon established a rainy day fund (RDF) that was initially funded at $319 million from a one-time suspension of the corporate kicker law, which is similar to the personal income tax kicker. In addition to retaining interest earnings, the fund will also receive biennial deposits from the General Fund ending balance, with amounts limited to the lesser of the actual General Fund ending balance for the preceding biennium or 1% of General Fund appropriations for the preceding biennium. The RDF is capped at 7.5% of General Fund revenues for a biennium. A three-fifths vote of each house of the Legislative Assembly is required to appropriate RDF moneys in the event of certain triggers. The state has also maintained additional reserves in its education stability fund (ESF), which receives 18% of net lottery revenues. The state anticipates combined reserve levels of $61.3 million at the end of the 2011-2013 biennium: $15.3 million in the ESF, and $46.1 million in the RDF. The low balance reflects a $182 million withdrawal from the ESF to bolster K-12 funding. Additionally the state has access to $72.7 million that is held by the Legislative Emergency Board, which can easily be accessed in the event of budgetary pressure. Strong reserve levels are especially important given Oregon's exposure to potential fluctuations in its personal income tax collections. The state expects to build the combined reserve levels up to $461 million by the end of the next biennium (2013-2015).

ECONOMIC FORECAST INCORPORATES DEEPER ECONOMIC DOWNTURN

The state's unemployment rate of 9.6% in August 2011 remains higher than the national rate of 9.1%, as it has throughout the recession. Total non-farm employment was essentially flat in 2010, although Oregon began losing jobs in August 2008, led by declines in the construction, manufacturing, and financial sectors. Employment declines averaged 6% for 2009 versus 4% for the U.S. The state revised its economic forecast to expect modest 1.7% employment growth in calendar year 2011 vs. 1.1% for the U.S..

STATE DEBT BURDEN REMAINS ABOVE AVERAGE

Oregon's 2011 net tax-supported debt as a percentage of personal income is 5.6%, and debt per capita is $2,006, well above Moody's 50-state medians of 2.8% and $1,066, respectively. A $2 billion pension bond issuance in fiscal year 2004 significantly improved Oregon's pension funding levels, which increased to over 100% funding in 2007 but also substantially increased its debt burden. The pension bonds are backed by the full faith and credit of the state; they are not secured by any assets of the pension system.

The state has approximately $441 million of Oregon's Department of Veterans' Affairs Bonds, of which $260 million are variable rate with enhancements provided by standby bond purchase agreements, primarily with Dexia Credit Local. Of the $260 million, $25 million is swapped synthetically to fixed rate debt. The variable rate bonds are uninsured and there are currently no bank bonds.

The state also has approximately $1.4 billion in highway user tax revenue bonds. The revenue bonds, rated Aa1 (senior lien) and Aa2 (subordinate line), are secured by highway user tax revenues consisting of motor carrier revenues, fuel tax revenues, and Department of Motor Vehicle (DMV) revenues. Of the total $1.4 billion outstanding, $155 million are variable rate supported by standby bond purchase agreements. There are no swaps on the highway revenue bonds, and the variable rate subordinate lien highway bonds are uninsured.

PENSION SYSTEMS WELL-FUNDED; MANAGEABLE OPEB LIABILITY

In 2003, the Oregon legislature adopted reforms in response to the state Public Employees' Retirement System's (PERS) growing unfunded actuarial liability and increasing charges to public employers to fund the system. The changes included lower benefits for new hires as well as reduced benefits for current employees and some existing retirees. As a result of an Oregon Supreme Court decision in 2005, many of the reforms were upheld. In April 2006, the Public Employees Retirement Board (PERB) approved changes to the system's valuation methodology, moving from a multi-year smoothing method to a mark-to-market valuation. These changes are expected to result in greater predictability, as well as a slight reduction in required employer contributions. Based on the 2009 valuation reports, the funded ratio of the combined state's PERS Tier 1 and Tier 2 pension programs' accrued actuarial liabilities was 88%. The state's portion of the unfunded liability is valued at $1.7 billion.

In terms of other post employment benefits (OPEB), Oregon's obligations appear manageable. State employee retiree healthcare benefits are provided through PERS or the Public Employees' Benefit Board (PEBB). As of December 31, 2009, the PERS-sponsored programs had unfunded actuarial liabilities of $78 million for the plan that offers retirees a subsidy for Medicare supplemental health insurance, and $18.1 million for a smaller subsidy for pre-Medicare age retirees. For the PEBB program, an implicit rate subsidy exists for retirees not yet eligible for Medicare, and the unfunded actuarial liability as of July 1, 2009, is estimated at $161.74 million.

Outlook

The credit outlook for the State of Oregon is stable. The state's economy has weakened in line with that of the nation. Employment is expected to recover modestly in 2011. Oregon's unusually high dependence on personal income taxes poses downside forecast risk given the deeper-than-expected economic downturn. The constitutional 2% kicker prevents Oregon from fully capturing the revenue boost during periods of economic strength although building up the state's RDF is expected to have a positive effect on the state's long-term fiscal health. Oregon's debt ratios are above average but remain manageable.

What could make the rating move - UP

*Effective management of voter initiatives in the context of maintaining structural budget balance.

*Maintenance of strong General Fund reserve levels to offset revenue volatility during economic downturns.

*Controlling increase in debt levels in a growing state with sizeable infrastructure needs.

*Sustained healthy job growth.

What could change the rating - DOWN

*Deterioration in the state's financial performance and reductions in reserve levels.

*Reliance on non-recurring solutions to balance budget.

*Slowing of economic recovery leading to further employment erosion and revenue weakness.

The principal methodology used in this rating was Moody's State Rating Methodology published in November 2004. 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 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, public 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 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 Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 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.

Analysts

Kimberly Lyons
Analyst
Public Finance Group
Moody's Investors Service

Marcia Van Wagner
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

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


Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS Aa1 RATING TO $40 MILLION STATE OF OREGON GENERAL OBLIGATION
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

 


All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. 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 or in preparing the Moody’s Publications.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

 


NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody’s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

© 2014 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: