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MOODY'S ASSIGNS Aa2 RATING AND STABLE OUTLOOK TO PAULDING COUNTY'S (GA) $8.8 MILLION REVENUE BONDS (PAULDING COUNTY ECONOMIC DEVELOPMENT PROJECT), SERIES 2011 A&B, ISSUED THROUGH PAULDING COUNTY INDUSTRIAL BUILDING AUTHORITY, GA

14 Mar 2011

MOODY'S AFFIRMS Aa2 RATING ON $96.2 MILLION OF OUTSTANDING COUNTY GENERAL OBLIGATION DEBT; OUTLOOK IS STABLE

Paulding (County of) GA
County
GA

Moody's Rating

ISSUE

RATING

Revenue Bonds (Paulding County Economic Development Projects), Series 2011A

Aa2

  Sale Amount

$1,095,000

  Expected Sale Date

03/11/11

  Rating Description

General Obligation

 

Taxable Revenue Bonds (Paulding County Economic Development Projects), Series 2011B

Aa2

  Sale Amount

$7,670,000

  Expected Sale Date

03/17/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Mar 14, 2011 -- Moody's Investors Service has assigned a Aa2 rating and a stable outlook to Paulding County's (GA) $1.1 million Revenue Bonds (Paulding County Economic Development Projects), Series 2011A and $7.7 million Taxable Revenue Bonds (Paulding County Economic Development Projects), Series 2011B, both issued through the Paulding County Industrial Building Authority, GA. Concurrently, Moody's affirmed the Aa2 rating on the county's $79.4 million general obligation debt and $8 million in outstanding tax-backed debt issued through the Paulding County Industrial Building Authority.

RATINGS RATIONALE

Pursuant to an intergovernmental contract, the 2011 bonds are secured by the county's absolute and unconditional pledge to levy a property tax, subject to a 1-mill limit, to cover debt service on the bonds. Bond proceeds will be used to fund various economic development projects. The Aa2 rating reflects the county's sizable tax base, ample reserve levels, and an average debt burden.

STRENGTHS

-Large tax base that benefits from its proximity to the Atlanta MSA

-Trend of solid fund balance reserves bolstered by formal policies

-Manageable debt burden

CHALLENGES

-Revenue pressures due to recent declines in tax base

DETAILED CREDIT DISCUSSION

COUNTY'S LIMITED TAX PLEDGE PROVIDES HEALTHY DEBT SERVICE COVERAGE; SATISFACTORY LEGAL PROVISIONS PROVIDE ADDITIONAL BONDHOLDER SECURITY

The Aa2 rating is based on the satisfactory protection offered by the county's 1-mill property tax pledge. The county is authorized to assess and collect up to 1 mill of property tax for economic development purposes, none of which is being assessed at this time. Based on the current tax roll, a 1-mill levy (at a 95% collection rate) would generate $3.16 million, providing ample 4.16 times coverage of maximum annual debt service (MADS) in 2013. Satisfactory legal provisions include a covenant to deposit semi-annual debt service payments with the Trustee at least five days in advance of the debt service due date and an additional bonds test of 1.0x MADS of outstanding and future bonds. At this time, there is no other outstanding debt under the 1-mill pledge; should the county issue additional bonds under the 1-mill pledge in future years, Moody's would reevaluate the strength of coverage margins at that time.

RAPID POPULATION GROWTH SPURRED BY PROXIMITY TO ATLANTA MSA; TAX BASE EXPANSION STAGNANT DUE TO MARKET DOWNTURN

Located approximately 30 miles northwest of the City of Atlanta (G.O. rated Aa2/negative), Paulding County has experienced significant population growth since 1980. Moody's expects the county to continue to experience steady tax base growth, albeit at more modest levels, given its proximity to major employment centers of Atlanta and pent up demand for commercial and industrial development. The county's population has increased 228% since 1990 to 136,655 in 2009. Additionally, the full market value of the county's tax base has more than tripled since 2000 to $11.5 billion in 2009, representing strong growth of 12.6% annually. However, 2010 and 2011 full market values declined by 10.6% and 17.2%, respectively, to a still-sizable $8.5 billion, largely due to the economic downturn and the effect of Act 163 (House Bill 233) and Senate Bill 55. Act 163 (House Bill 233), approved by the General Assembly during the 2009 legislative session, establishes a three-year moratorium on growth during which time no increase in assessed value of real property (tax years 2009-2011) is permitted. The law specifically allows assessed values to decline, a factor that is compounded by separate legislation (Senate Bill 55) requiring foreclosures to be counted as fair market sales for property reappraisal beginning with tax year 2009.

Going forward, the recently established Paulding County Economic Development Organization is expected to create jobs and foster economic growth by targeting the aerospace, automotive and film industries. Concurrently, commercial and industrial development is anticipated due to the Paulding County Regional Airport, which opened in 2008. Countywide unemployment as of December 2010 was 10.2%, in line with the statewide rate, while per capita income remains sound at 94.4% and 92.5% of the state and nation, respectively.

HISTORICALLY SOUND FINANCIAL POSITION GUIDED BY FORMAL FISCAL POLICIES

Moody's believes that Paulding County will maintain its satisfactory financial position, given management's conservative fiscal practices and a formal fund balance policy of maintaining unreserved fund balance equal to at least 25% of expenditures. The county reported four consecutive years of operating surpluses since fiscal 2005, increasing fund balance to $21.4 million (an ample 36.1% of revenues) in fiscal 2008 from $19.8 million (44.1% of revenues). The surpluses were driven by positive revenue performance and expenditure savings, reflective of management's conservative budgeting practices. In fiscal 2009, the county reported a $4.5 million deficit largely due to a one-time transfer of $4.3 million to the Debt Service Fund to cover future debt service payments. Unaudited results report a modest deficit of $121,000 in fiscal 2010 due to declines in investment income and charges for services, which were partially offset by 12 furlough days and a reduction in expenditures across all departments.

The county's fiscal 2011 adopted budget represents a 4.2% decline relative to the prior year's budget, driven by a reduction in public works expenditures. The budget includes a 0.95 mill tax rate increase and an appropriation of $2.7 million of fund equity to offset a 17% decline in the county's tax base. Management anticipates using at least $1 million of appropriated reserves at fiscal year-end; however, officials do not expect fund balance to fall below the county's formal target of 25%. Approximately 78.6% of the operating revenues are derived from local taxes, followed by charges for services (9%).

AVERAGE DEBT BURDEN; MANAGEABLE FUTURE DEBT PLANS

The county's direct debt burden is a manageable 1.1% of full value, which includes debt issued through several conduit authorities, for which the county has covenanted its unconditional, general obligation tax pledge. Including outstanding debt of overlapping municipalities, the county's overall debt burden increases to a slightly above average at 2.9% of full valuation. The county's amortization rate is below average with 44.8% of outstanding debt maturing in 10 years. Future debt plans include ongoing economic development projects, $9.4 million of which are expected to be financed with bonds within the next year. Importantly, the county's voter-approved 1% Special Purpose Local Option Sales Tax (SPLOST) program provides additional support for the county's capital projects. The current six-year program expires on March 31, 2011 and has been renewed for another six-year term in which the county is authorized to collect up to $95 million in funding for capital projects countywide. All of county's debt is in a fixed-rate mode and there are no derivative agreements outstanding.

OUTLOOK

The stable outlook is reflective of Moody's belief that, despite recent declines in tax base and ongoing revenue pressures, the county will maintain satisfactory reserves levels and this limited-tax debt will maintain ample coverage of debt service.

WHAT COULD MOVE THE RATING UP:

-Increased fund balance reserves

-Continued tax base growth and diversification

WHAT COULD MOVE THE RATING DOWN:

-Deterioration of reserves driven by structurally imbalanced operations

-Significant declines in tax base

KEY STATISTICS

2009 population: 136,655 (67.3% increase since 2000)

Fiscal 2011 full valuation: $8.5 billion

Fiscal 2011 full valuation per capita: $62,158

1999 Per Capita Income: $19,974 (94.4% of the state, 92.5% of the U.S.)

1999 Median Family Income: $56,039 (113.7% of the state, 112% of the U.S.)

December 2010 unemployment rate: 10.2%

Direct Debt burden: 1.1%

Payout of principal (10 years): 44.8%

FY 2010 General Fund balance: $19.9 million (34.1% of fund revenues)

FY 2010 undesignated General Fund balance: $16.5 million (28.2% of fund revenues)

Post-issue parity bonds outstanding: $96.2 million

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October, 2009.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings and public 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

Lauren Von Bargen
Analyst
Public Finance Group
Moody's Investors Service

Julie Beglin
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

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


Moody's Investors Service
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New York, NY 10007
USA

MOODY'S ASSIGNS Aa2 RATING AND STABLE OUTLOOK TO PAULDING COUNTY'S (GA) $8.8 MILLION REVENUE BONDS (PAULDING COUNTY ECONOMIC DEVELOPMENT PROJECT), SERIES 2011 A&B, ISSUED THROUGH PAULDING COUNTY INDUSTRIAL BUILDING AUTHORITY, GA
No Related Data.
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