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MOODY'S ASSIGNS Aa2 RATING TO DOWNTOWN SMYRNA DEVELOPMENT AUTHORITY (GA) $15.8 MM TAXABLE ECONOMIC DEVELOPMENT REVENUE BONDS, SERIES 2010

15 Nov 2010

RATING ASSIGNMENT AFFECTS $15.8 MM IN DEBT, INCLUDING CURRENT OFFERING

Municipality
GA

Moody's Rating

ISSUE

RATING

Taxable Economic Development Revenue Bonds, Series 2010

Aa2

  Sale Amount

$15,810,000

  Expected Sale Date

11/17/10

  Rating Description

General Obligation Limited Tax

 

Opinion

NEW YORK, Nov 15, 2010 -- Moody's Investors Service has assigned a Aa2 rating to Downtown Smyrna Development Authority's (GA) $15.8 million Taxable Economic Development Revenue Bonds, Series 2010. Pursuant to an intergovernmental contract with the authority, the bonds are secured by the city's pledge of an ad valorem tax on all taxable property within a three mill limit authorized pursuant to Georgia law. Bond proceeds will finance the acquisition and demolition of an apartment complex and includes capitalized interest through 1 February 2013.

RATINGS RATIONALE

The Aa2 rating primarily reflects sufficient coverage of peak debt service and also incorporates the city's general credit characteristics, including stable and healthy financial position, modest debt levels and a stable tax base.

SUBURBAN ATLANTA COMMUNITY TAX BASE DECLINED BY 8% IN COLLECTION YEAR 2011

Located ten miles northwest of Atlanta (GO rated Aa2 with negative outlook), Smyrna residents benefit from numerous employment opportunities in the Atlanta metropolitan area. Since the 2000 census, population grew by 23.7% to 50,712, and taxable values grew at a more moderate annual average rate of 8.4% from 2005 to 2010, including above average annual growth of 20.1% (2006) and 10.9% (2007) and a 0.4% decline (2010). Current 2011 tax base of $5.4 billion represents a 7.9% decline from the prior year. Management does not anticipate any decline in taxable values for 2012. Wealth levels in the city are above state levels and full value per capita is also above the state median at $106,765.

WELL MANAGED FINANCIAL OPERATIONS YIELD HEALTHY GENERAL FUND RESERVES

Since fiscal 2001, the city's financial operations have yielded relatively stable general fund reserves of between 26.3% of general fund revenues and 34.6%. Healthy reserve levels are guided by formal policies, conservative budgeting and strict expenditure controls. Fiscal 2010 ended with a $1.4 million operating surplus to increase total general fund balance to $13.6 million (35.9% of revenues) from $12.2 million (30.9% of revenues). The operating surplus was generated through savings on various expenditure line items and $7.0 million in budget adjustments over the past two fiscal years; these included 10 layoffs, employee benefit adjustments and reductions to expenditures. Local tax revenues are the city's primary revenue (67.8%) in fiscal 2010, followed by charges for services (17.7%). Officials anticipate no future draws upon total general fund balance and expect to maintain their formal unreserved general fund policy that requires 25.0% of unreserved general fund revenues.

DEBT SERVICE SECURED BY PLEDGE OF AD VALOREM PROPERTY TAX OF 3 MILLS

Smyrna's debt burden is expected to remain manageable, given a modest debt burden and no plans for future borrowing. The city's direct debt burden is a modest 0.9% of 2011 full valuation. The city's amortization of principal is below average at 37.5% of principal retired within 10 years. Pursuant to an intergovernmental contract with the authority, the current issue is secured by the city's pledge of an ad valorem tax on all taxable property within a three mill limit authorized pursuant to Georgia law.. Bond proceeds will finance the acquisition and demolition of an apartment complex and includes capitalized interest through 1 February 2013. While no debt service reserve is provided for this issuance, peak debt service on the bonds is covered sufficiently by the 2010 collection year's three mills at 4.65 times. Legal documents provide for an additional bonds test that is 125% of average annual debt service, with no new senior lien bonds allowed. The city has no variable rate debt outstanding and is not party to any derivative agreements.

What could move the rating-UP

- Trend of significantly improved and maintained general fund reserve levels

- Trend of significant growth in full valuation

- Significant improvement in socioeconomic measures

What could move the rating-DOWN

- Significant deterioration in the district's financial position

- Protracted decline in the district's full valuation

KEY STATISTICS

2008 Estimated population: 50,712

2011 Full valuation: $5.4 billion

2011 Full value per capita: $106,765

Direct debt burden: 0.9%

Overall debt burden: 6.4%

Payout of principal (10 years): 37.5%

Fiscal 2010 general fund balance: $13.6 million (35.9% of general fund revenues)

1999 PCI (as % of GA and US): $27,637 (130.6% and 128.0%)

1999 MFI (as % of GA and US): $53,821 (109.2% and 107.5%)

Pension funding level (1 January 2010: 64.8%

Annual OPEB contribution (30 June 2010): $897,615

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

Justin Resuello
Analyst
Public Finance Group
Moody's Investors Service

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

Julie Beglin
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 Aa2 RATING TO DOWNTOWN SMYRNA DEVELOPMENT AUTHORITY (GA) $15.8 MM TAXABLE ECONOMIC DEVELOPMENT REVENUE BONDS, SERIES 2010
No Related Data.
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