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MOODY'S ASSIGNS Aa1 RATING TO ARROWHEAD JOINT UNION HIGH SCHOOL DISTRICT'S(WI) $8.8 MILLION GO REFUNDING BONDS

19 Oct 2010

Aa1 RATING APPLIES TO $15.8 MILLION OF POST-SALE GOULT DEBT

Primary & Secondary Education
WI

Moody's Rating

ISSUE

RATING

General Obligation Refunding Bonds

Aa1

  Sale Amount

$8,775,000

  Expected Sale Date

10/25/10

  Rating Description

General Obligation Unlimited Tax

 

Opinion

NEW YORK, Oct 19, 2010 -- Moody's has assigned a Aa1 rating to Arrowhead Joint Union High School District (WI) $8.8 million General Obligation Refunding Bonds. Concurrently, Moody's also affirms the Aa1 rating on the district's $18 million of outstanding general obligation debt, including the current offering.

RATING RATIONALE

The bonds are secured by the district's unlimited general obligation tax pledge. Proceeds of the bonds will refund the district's outstanding General Obligation Refunding Bonds dated May 1, 2001 and State Trust Fund Loan dated January 2, 2009 for an estimated net present value savings of ten percent. The Aa1 rating reflects the district's sound financial operations with solid reserve levels, large affluent tax base with recent declines in valuation, slightly declining enrollment and low debt burden.

SOUND FINANCIAL OPERATIONS WITH SOLID RESERVE LEVELS

The district's financial operations are expected to remain strong due to the support of healthy reserve levels and conservative budgeting practices. The district's General Fund balance has equaled 23% to 25% of revenues over the past several fiscal years. The district has consistently posted General Fund operating surpluses with modest uses of reserves for planned capital needs. Fiscal 2009 closed with a General Fund balance of $6.2 million, or a healthy 24.2% of revenues. Fiscal 2010 unaudited figures indicate a modest use of fund balance due to a transfer of monies into the OPEB trust and for the purchase of new bleachers. Preliminary fiscal 2010 figures indicate a General Balance of $5.6 million, or a still healthy 22% of revenues. Officials project balanced operations for fiscal 2011, but may use a modest $50,000 for fire hydrants. Despite modest uses of reserves, officials project the fiscal 2011 General Fund balance will equal approximately 22.6% of revenues. While the district does not have a formal fund balance policy, the district does not have any plans to draw upon reserves.

Like all Wisconsin school districts, the district operates under state imposed revenue limits which are significantly indexed to enrollment trends. As such, periods of stagnant or declining enrollment can place pressure on a district's balance sheet. Enrollment has been declining modestly at an average -0.4% since 2006. The district attributes the recent declines in enrollment to large graduating classes and expect enrollment to stabilize in the near term. The district does participate in open enrollment which has a net gain of 121 students annually somewhat mitigating declining enrollment trends.

LARGE AFFLUENT TAX BASE NEAR MILWAUKEE; RECENT DECLINES IN VALUATION

We believe the district's sizable $5.5 billion tax base, will continue to benefit from its proximity to Milwaukee (GO rated Aa1/ negative outlook) despite recent declines in valuations. Previously to 2009, the district's taxbase had grown at a healthy annual average rate of 6.1%. However, reflective of national trends, the district's taxbase declined by 3.3% in 2009 and an additional 2.8% in 2010, bringing the average annual rate of growth to a slow 2.3% over the past five years. Officials expect this trend to continue in the near term. Residents do enjoy numerous and diverse employment opportunities in the City of Milwaukee and within Waukesha County (Aaa). The district's largest employers include Pro Healthcare (5,885 employees) and Kohl's Corporation headquarters (senior unsecured rated Baa1/stable outlook, 5,220 employees). Officials report the largest employers and taxpayers in the district remain stable. Resident wealth indices exceed the state with per capita and median family incomes at 154.3% and 152.8% of the state, respectively. The service area's generally favorable economic attributes are reflected in consistently low county unemployment rates (6.9% for August 2010), relative to the state's (7.7%) and the nation's (9.5%) during the same period.

LOW DEBT BURDEN; NO ADDITIONAL BORROWING PLANNED

The district is an infrequent issuer of debt demonstrated by its low direct debt burden of 0.3% and overall debt burden of 1.3%. We expect the district's debt burden will remain manageable given no future borrowing plans and rapid principal amortization. Principal amortization is rapid with 100% of principal repaid in 10 years. All of the district's debt is in fixed rating mode and the college is not party to any derivative agreements.

WHAT COULD CHANGE THE RATING - UP

Substantial growth in the district's taxbase

Substantial improvement in General Fund reserves

WHAT COULD CHANGE THE RATING - DOWN

Significant erosion of the district's taxbase

Significant deterioration in General Fund reserves

KEY STATISTICS

2000 Census population: 29,176

Enrollment trend (annual average decrease since 2006): -0.4%

2010 Full valuation: $5.5 billion

Full value per capita: 189,549

Waukesha County 2000 per capita income as a % of state: 154.3%

Waukesha County 2000 median family income as a % of state: 152.8%

Waukesha County unemployment rate (August 2010): 6.9%

Direct debt burden: 0.3%

Overall debt burden: 1.3%

Payout of principal (10 years): 100%

Fiscal 2009 General Fund balance: $6.2 million (24.2% of revenues)

Post-sale general obligation unlimited tax debt outstanding: $15.8 million

PRINCIPAL METHODOLOGY

The principal methodology used in rating Arrowhead Joint Union High School District (WI) was General Obligation Bonds Issued by U.S. Local Governments rating methodology published in October 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, 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 assigning 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

Soo Yun Chun
Analyst
Public Finance Group
Moody's Investors Service

Elizabeth Foos
Backup Analyst
Public Finance Group
Moody's Investors Service

Edward Damutz
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

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


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

MOODY'S ASSIGNS Aa1 RATING TO ARROWHEAD JOINT UNION HIGH SCHOOL DISTRICT'S(WI) $8.8 MILLION GO REFUNDING BONDS
No Related Data.
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