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MOODY'S ASSIGN'S Aa2 RATING TO COOK COUNTY (IL) TOWNSHIP HIGH SCHOOL DISTRICT NUMBER 220'S (REAVIS) $9.3 MILLION LIMITED SCHOOL BONDS, SERIES 2010

17 Sep 2010

Aa2 RATING APPLIES TO $16.4 MILLION OF POST SALE GO DEBT

Primary & Secondary Education
IL

Moody's Rating

ISSUE

RATING

Limited School Bonds, Series 2010

Aa2

  Sale Amount

$9,315,000

  Expected Sale Date

10/01/10

  Rating Description

General Obligation Limited Tax

 

Opinion

NEW YORK, Sep 17, 2010 -- Moody's Investors Service has assigned an Aa2 rating to Cook County (IL) Township High School District Number 220's (Reavis) $9.3 million Limited School Bonds, Series 2010. Concurrently, Moody's has affirmed the Aa2 rating on the district's outstanding debt. Post sale, the district will have $16.4 million of outstanding general obligation debt.

RATINGS RATIONALE

The bonds are secured by the district's limited tax pledge, payable from the district's debt service extension base (DSEB). While the amount of the annual levy as of 2010 is limited to $1.88 million, there are no limits on the tax rate to generate this amount. Approximately $4.5 million of the proceeds will be used to finance various life safety projects while the remainder of the issuance will refund a portion of the district's outstanding Limited School Bonds, Series 2001 and Series 2008. The Aa2 rating reflects the district's advantageous location southwest of downtown Chicago, near Chicago Midway International Airport, strong and liquid financial position evidenced by ample reserves, and below average direct debt burden with minimal future borrowing anticipated.

DIVERSE REGIONAL EMPLOYMENT BASE AND MODERATE TAX BASE GROWTH

Located in Cook County (GO rated Aa2, stable outlook) approximately 22 miles southwest of downtown Chicago (GO rated Aa3, stable outlook) and adjacent to the western border of Chicago, the district serves the City of Burbank (GO rated Aa2) as well as portions of the communities of Bedford Park (GO rated A1), Bridgeview and Forest View. The district benefits from its advantageous location adjacent to Chicago and Chicago Midway International Airport, having a diverse tax base and simple access to employment centers throughout the broader Chicago region. Relative to its residential properties, the district has a significant industrial base, home to among other employers rail yards and shipping companies, and a significant commercial base, located mostly along the western side of Cicero Avenue. The district's tax base valuations are 40% residential, 19% commercial and 41% industrial. Although the district has benefited over the past ten years from residential tear downs and rebuilds, that activity has slowed and the district's residential properties are mostly built out. A mature residential base and changing demographic trends led to modest annual growth in assessed valuation, averaging 7.9% annually over the five years ending fiscal 2008, and declining population, with population falling 8.3% between the 1990 and 2000 Censuses. With the local employment base concentrated in the industrial sector, unemployment rates are above average, with the June 2010 rate at 10.9%, above both the state unemployment rate of 10.6% and the national unemployment rate of 9.6%for the same period. Resident wealth levels fall below state and national rates as well, with per capita and median family income at 99% and 80% of national levels, respectively.

The district is a high school district that has seen decent enrollment growth for the past several years, with fiscal 2004 enrollment at 1,631 students and a fiscal 2010 enrollment of 1,773. Officials report the district's high school building has no capacity concerns and expect flat enrollment over the next several years.

HEALTHY LIQUIDITY POSITION WITH AMPLE RESERVE LEVELS

Although the district does not have a formal fund balance policy, the district has had a history of maintaining solid reserve levels in the General Fund. The district ended fiscal 2005 with $5.7 million, or 29% of annual General Fund (Educational and Operations & Maintenance funds combined) revenues in reserve. By the close of fiscal 2009, reserves increased to $15 million, or 64% of annual revenues. In addition to General Fund reserves, the district retains unencumbered Working Cash reserves, ending fiscal 2009 with approximately $7.9 million. Total General Fund reserves and Working Cash reserves at the close of fiscal 2009 were almost 100% of annual General Fund revenues. Due mostly to capital expenditures, preliminary indications are the district closed fiscal 2010 with a $600,000 draw on General Fund reserves. The district is budgeting for a $2.6 million draw on reserves for fiscal 2011, but realistically expects to draw down reserves by a maximum of $1 million. Evidencing the district's conservative budgeting strategies, the district has historically had significantly positive budget to actual variances.

At the close of fiscal 2009, the district's General Fund reserves were somewhat inflated by the district's Series 2008 bond proceeds. In fiscal 2009 the district issued $9.9 million in working cash bonds and transferred $6.7 million of the proceeds to the General Fund for capital expenditures; however, the district only expended a portion of the proceeds during fiscal 2009. The district's audits are on a modified cash basis so until the bond proceeds are expended the bond proceeds artificially inflate the fiscal year end fund balance. It is estimated approximately $5 million of bond proceeds remained in the General Fund at the close of fiscal 2009. The district's estimated draw on fiscal 2010 reserves is due to capital expenditures funded by the bond proceeds. The district plans to transfer $4.5 million of the Series 2010 bond proceeds to the General Fund for capital expenditures during fiscal 2011. All bond proceeds are expected to be completely expended by the close of fiscal 2011.

AVERAGE DEBT BURDEN WITH AGGRESSIVE PRINCIPAL AMORTIZATION

We expect the district's somewhat above average overall debt burden of 3.1% (0.4% direct) to remain manageable due to rapid amortization of principal and limited needs for future debt. The district is issuing the Series 2010 bonds to complete its life safety plan and its existing capital needs. The district has a Debt Service Extension Base (DSEB) of approximately $1.88 million and is utilizing its DSEB through 2018 with this issuance. The district retires 100% of principal within 10 years and has no plans for additional debt. The district does not short term borrow for cash flow purposes.

KEY STATISTICS FOR TOWNSHIP HIGH SCHOOL DISTRICT NUMBER 220

2008 full value: $3.8 billion

2009 estimated population: 31,836 (-8.3% since 2000)

2010 enrollment: 1,773 (+1.4% on average annually since 2004)

2008 full value per capita (estimate): $119,508

2000 Median family income as % of state: 99.3% (110.3% of US)

2000 Per capita income as % of state: 80.2% (85.9% of US)

June 2010 Cook County unemployment rate: 10.9% (IL at 10.6%, US at 9.6%)

Fiscal 2009 General Fund balance (modified cash basis of accounting): $15.25 million (64% of General Fund revenues)

Fiscal 2009 Working Cash Fund balance: $7.9 million

Post-sale GOULT debt outstanding: $16.4 million

Debt burden: 3.1% (0.4% direct)

Principal payout (10 years): 100%

PRINCIPAL METHODOLOGY

The principal methodology used in rating Cook County Township High School District Number 220 (IL) 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, public information, confidential and proprietary Moody's Investors Service's 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.

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

David Horton
Analyst
Public Finance Group
Moody's Investors Service

Rachel Cortez
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
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MOODY'S ASSIGN'S Aa2 RATING TO COOK COUNTY (IL) TOWNSHIP HIGH SCHOOL DISTRICT NUMBER 220'S (REAVIS) $9.3 MILLION LIMITED SCHOOL BONDS, SERIES 2010
No Related Data.
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