Aa1 RATING APPLIES TO $19 MILLION OF OUTSTANDING GOLT DEBT
General Obligation Limited Tax Various Purpose Refunding Bonds, Series 2011
Expected Sale Date
General Obligation Limited Tax
NEW YORK, Jun 13, 2011 -- Moody's Investors Service has assigned a Aa1 rating to City of Troy's (OH) $2.2
million General Obligation Limited Tax Various Purpose Refunding Bonds, Series
2011. Concurrently, Moody's has affirmed the Aa1 rating on the city's
outstanding general obligation debt. Post-sale, the city will have $19 million
of outstanding general obligation debt.
SUMMARY RATING RATIONALE
The current bonds are secured by the city's general obligation limited tax
pledge, subject to Ohio's statutory 10 mill limitation. Proceeds from the Series
2011 bonds will refund the city's outstanding Capital Facilities Improvement and
Refunding Bonds, Series 1999, for savings. The Series 1999 bonds were originally
issued for the purpose of improving the city's municipal sewer utility and
refunding bonds that were issued by the City for the purpose of financing
improvements to the city's water system and roads. The Aa1 general
obligation limited tax rating reflects the city's modestly sized though stable
tax base located twenty miles north of Dayton (GO rated Aa2/stable); strong
financial operations supported by substantial reserves; and manageable debt
profile with limited near term borrowing planned and rapid amortization.
-Additional liquidity provided by Investment Fund for Capital Improvement
-Year-to-date 2011 income tax revenues trending significantly higher than
-Multi-year trend of declining assessed valuation
-Wealth indices track below state and national medians
DETAILED CREDIT DISCUSSION
RELATIVELY SMALL TAX BASE EXPERIENCING SIGNIFICANT POPULATION GROWTH
The city's relatively small tax base located 20 miles north of the city of
Dayton (GO rated Aa2) and the county seat for Miami County (GO rated Aa2) will
likely remain stable as the result of significant growth in population from 2000
to 2010. The city's $1.4 billion tax base has declined 2.2% annually over the
past five years. The local economy contains a diverse group of durable goods
manufacturers that produce automotive and aircraft products and management
reports the city's largest employers and taxpayers are stable. At 8.8% in April
2011, Miami County's unemployment rate tracks above state and national medians
(at 8.4% and 8.7% respectively). Resident income levels for the City of Troy
track just below state and national medians, with per capita income at 94.7% and
92.1% of state and national levels, respectively, and median family income at
93.7% of both state and national levels.
STRONG FINANCIAL OPERATIONS SUPPORTED BY SUBSTANTIAL RESERVES
Maintenance of the city's healthy financial position is expected due to prudent
financial management and the significant level of unreserved cash available for
operations. In fiscal 2009, the city's General Fund balance was $42.5 million,
or a substantial 207.6% of General Fund revenues. In fiscal 2010, the city's
General Fund balance increased to $44.2 million or a substantial 206.6% of
General Fund revenues. In fiscal 2011, though officials budgeted for the General
Fund to remain at 2010 levels, 2011 year-to-date income tax receipts have
increased by 15.5%. The majority of the General Fund reserve is comprised of
proceeds from the city's sale of an electric power plant to the Dayton Power and
Light Company (senior unsecured rated A2) in 1969. Proceeds from the sale were
originally set aside in the city's Investment Fund for Capital Improvement.
Though not available for general operations, proceeds from the sale were rolled
into the General Fund in conjunction with GASB 34 reporting in 2003.
Previously, this expendable trust was part of the Trust and Agency fund,
and three-fourths of the interest earned in this fund was transferred annually
to the General Fund, which continues to be the city's practice as approximately
$30 million of the expendable trust and accumulated interest not transferred to
the General Fund is restricted by council ordinance. The city has a
long-standing practice of retaining the principal of this trust and plans to
continue to do so. We believe the city's finances will remain strong due to
proven solid financial management and strong reserve levels.
MANAGEABLE DEBT POSITION; LIMITED FUTURE BORROWING PLANS
The city's debt position should remain manageable given an affordable direct
debt burden, limited future borrowing plans and rapid amortization. At 1.5% and
2.7% respectively, the city's overall debt burden and direct debt burden track
below state and national medians. Principal amortization is aggressive, with
89.4% of debt retired in ten years. All of the city's outstanding debt is fixed
rate and the city is not party to any interest rate swap agreements.
WHAT COULD CHANGE THE RATING - UP
- Strengthening of the city's overall economic profile, supported by improved
resident income levels and a substantial decline in unemployment
-Significant increases in property valuation
WHAT COULD CHANGE THE RATING - DOWN
-Substantial decline in property values or weakening of the city's demographic
Census 2010 population: 25,058 (14% increase from 2000 population)
2011 full market valuation: $1.4 billion (2.2% average annual decrease since
Estimated full value per capita: $64,922
Per capita income as % of U.S. (1999): 92.1%
Median family income as % of U.S. (1999): 93.7%
Miami County unemployment rate (April 2011): 8.8%
FY 2010 General Fund balance (GAAP): $44.2 million (206.6% of revenues)
Debt burden: 2.7% (1.5% direct)
Principal amortization (10 years): 89.4%
Post-Sale GOLT debt: $19 million
PRINCIPAL METHODOLOGY USED
The principal methodology used in this rating was General Obligation
Bonds Issued by U.S. Local Governments published in October 2009.
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 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 assigning a credit rating.
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Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S ASSIGNS Aa1 RATING TO CITY OF TROY'S (OH) $2.2 MILLION GENERAL OBLIGATION LIMITED TAX VARIOUS PURPOSE REFUNDING BONDS, SERIES 2011
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