Aa1 RATING APPLIES TO $10.9 MILLION OF POST SALE GO DEBT
General Obligation Limited Tax Special Assessment Bonds, Series 2011
Expected Sale Date
General Obligation Limited Tax
NEW YORK, Aug 31, 2011 -- Moody's Investors Service has assigned a Aa1 rating to Clermont County's (OH) $5
million General Obligation Limited Tax Special Assessment Bonds, Series 2011.
Concurrently, Moody's has affirmed the Aa1 rating on the county's outstanding
general obligation limited tax debt. The rating applies to a total of
$10.9 million of GO debt, post-sale.
SUMMARY RATINGS RATIONALE
The Series 2011 bonds are secured by the county's general obligation limited tax
pledge, subject to the ten-mill limitation, although debt service is expected to
be paid by special assessments against benefiting properties. Proceeds of the
bonds will reimburse the county for expenditures incurred in connection with
several recent infrastructure improvement projects. Assignment and affirmation
of the Aa1 general obligation rating reflects the county's sizeable tax base
favorably located near Cincinnati (general obligation rated Aa1/stable); solid
financial position supported by ample reserves providing adequate cushion
against fluctuations in sales tax revenues; and low debt burden with no plans to
issue new debt in the near term.
-Proximity to Cincinnati
-Stable reserve levels despite recent revenue declines
-Significant economic development expected in the near to mid-term yielding new
employment opportunities within the county
-Reliance on economically sensitive revenues
-Significant declines in assessed valuation expected for 2011
DETAILED CREDIT DISCUSSION
SIZEABLE TAX BASE LOCATED NEAR CINCINNATI
We expect the county's sizeable $12.8 billion tax base will remain relatively
stable, despite anticipated valuation declines in 2011. Comprising 452 square
miles, the county is located 22 miles east of the City of Cincinnati.
Residential values have held steady throughout the national recession,
increasing by 1.2% over the last five years, though officials project total
assessed valuation to decline by 9% in 2011 due to market value
losses. Officials report the county's largest taxpayer, Duke Energy Ohio, Inc.
(rated Baa1/stable) has announced it will close the smaller of its two coal
plants within the county in the near term, though the exact date has not yet
Favorably, the county is experiencing significant levels of new economic
development. The North American headquarters of Tata Consultancy Services Ltd.
(rated A3/stable), an information systems consulting firm, resides in the
county. Tata established a presence in the county with 80 full-time employees
and has grown to employ over 450 people. Officials report the company expects to
expand to 1,000 employees over the next six years. L-3 Fuzing & Ordnance
Systems Inc., a large defense contractor, is adding jobs as the result of
obtaining some new large contracts. Additionally, Cincinnati Milacron, a
plastics molding machine manufacturer, has begun to rehire 150 previously laid
off employees. The county's population increased by 10.9% from 2000 to 2010. The
county's tax base is somewhat concentrated as the ten largest tax payers
accounted for 9.1% of total assessed valuation in 2010. At 9.1% in June 2011,
the unemployment rate for Clermont County tracks just below state (9.2%) and
national (9.3%) levels for the same period. Wealth indices for the county track
above national levels, with median family income and per capita income at 114%
and 103.6% of national levels, respectively. We expect the county's tax base to
remain stable as the result of residential property values largely holding
steady and as the county continues to experience significant new economic
SOLID FINANCIAL POSITION SUPPORTED BY AMPLE RESERVES PROVIDING CUSHION AGAINST
FLUCTUATIONS IN SALES TAX REVENUES
We believe the county's financial operations will remain solid as the result of
prudent budgeting practices and despite the volatility of sales tax revenues,
which comprised 39.5% of total General Fund revenues in 2010.The county ended
fiscal 2009 with a healthy General Fund balance of $16 million (or 34% of total
General Fund revenues). From 2009 to 2010, officials reduced expenditures by
$3.8 million, with cost savings resulting from keeping vacant positions open,
closing part of the county jail and reducing capital expenditures. As a result,
fiscal 2010 results reflect a slight increase in General Fund reserves, to
$16.2 million (or 33.5% of total General Fund revenues).
Officials expect the General Fund to end fiscal 2011 with a balance of $17.8
million (or 37% of 2010 level General Fund revenues). This increase is
attributable to a favorable variance in use tax revenues resulting from a
statewide use tax audit as well as partial repayment of a loan to Union Township
(general obligation rated Aa2) in connection with a large retail development
project. The county loaned Union Township $2 million in connection with
the project. $0.5 million will be repaid by the township in 2011 and $1.5
million will be repaid in 2012-2013. We note the projected increase in General
Fund balance in 2011 is attributable to one time revenues. The county received a
modest 0.05% reduction in state aid in 2011. In fiscal 2012, officials expect
the General Fund to end the year at $15.6 million as the result of a $1.8
million reduction in state aid. In the long-term, we expect the county's General
Fund balance will increase as the result of annual revenues realized from a land
purchase agreement with a local real estate developer, wherein the
county purchased parcels of land and the developer agreed to buy it over a
period of 10 years. Additionally, starting in 2013, the county expects to
receive approximately $1.7 million in annual revenue from the expected
completion of four new casinos that are being built in the state. The county
does not have a formal fund balance policy, but officials abide by an informal
guideline of maintaining a minimum General Fund balance of 25% of the previous
year's expenditures, a level the county has far exceeded every year since 2005.
BELOW-AVERAGE DEBT BURDEN WITH NO ADDITIONAL NEAR-TERM BORROWING PLANNED
We believe the county's debt burden will remain affordable due to a lack of
near-term borrowing plans and low debt levels. At 0.2% and 1.7% of full value,
respectively, the county's direct and overall debt burdens are below average.
Principal amortization is slow, with 49.7% of principal retired in ten
years. Officials report the county has no concrete plans to issue
additional debt in the near-term, though the county is considering a potential
bond issuance in the long-term to finance new emergency communications
equipment. Given affordable debt levels and a lack of near-term borrowing needs,
we expect the county's debt profile will remain affordable. All of the county's
outstanding debt is fixed rate and the county is not party to any interest rate
WHAT COULD CHANGE THE RATING UP:
-Significant expansion and diversification of the county's tax base
-Substantial improvement in reserve levels to levels commensurate with higher
WHAT COULD CHANGE THE RATING DOWN:
-Significant erosion of the county's tax base and/or weakening of socio-economic
-Deterioration in General Fund reserves to a level inconsistent with similarly
Census 2010 population: 197,363 (10.9% increase from 2000 population)
2010 estimated full market valuation: $12.8 billion (1.2% average annual
increase since 2005)
Estimated full value per capita: $64,855
Per capita income as % of U.S. (1999): 103.6%
Median family income as % of U.S. (1999): 114.0%
Unemployment rate (June 2011): 9.1%
FY 2010 General Fund balance (GAAP): $16.2 million (33.5% of total General Fund
Debt burden: 1.7% (0.2% direct)
Principal amortization (10 years): 49.7%
Post-Sale GOLT debt: $10.9 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. 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 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.
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 CLERMONT COUNTY'S (OH) $5.0 MILLION GOLT SPECIAL ASSESSMENT BONDS, SERIES 2011
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007