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New Issue:

MOODY'S ASSIGNS Aa2 RATING TO MATANUSKA-SUSITNA BOROUGH, ALASKA G.O. BONDS

17 Feb 2011

APPROXIMATELY $200.9 MILLION IN DEBT AFFECTED

Matanuska-Susitna (Borough of) AK
County
AK

Moody's Rating

ISSUE

RATING

General Obligation School Bonds, 2011 Series A

Aa2

  Sale Amount

$33,785,000

  Expected Sale Date

02/23/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Feb 17, 2011 -- Moody's Investors Service has assigned an Aa2 rating to the Matanuska-Susitna Borough's General Obligation School Bonds, 2011 Series A in the amount of approximately $33.8 million. We have also affirmed the Aa2 rating on the borough's outstanding general obligation bonds in the amount of approximately $200.9 million including the current issue. The bonds are secured by the full faith and credit of the borough including an unlimited property tax pledge. Proceeds of the current offering will be used to fund school projects.

RATING RATIONALE

The rating reflects continued expansion of the borough's tax base and economy, maintenance of sound financial operations buttressed by healthy financial reserves and low debt levels.

THE BOROUGH, WHICH NEIGHBORS ANCHORAGE, REMAINS THE FASTEST GROWING AREA IN ALASKA

Matanuska-Susitna is the third most populous borough and fastest growing region in Alaska. Benefiting from its close proximity to Anchorage (G.O. bonds rated Aa2), the borough's tax base has more than doubled since 2004. Average annual growth in full value from 2006 to 2010 was 7.7%. Following double-digit growth rates from 2004 to 2008, taxbase expansion has slowed significantly over the last three years, with fiscal 2011 assessed value growing by only 1.7% to $8.21 billion. Between the 1990 and 2000 censuses, the population grew by 50% and since 2000 by an additional 39.1%. Although we attribute much of this growth to the borough's role as a bedroom community to Anchorage, the rapid rate of development has stimulated the borough's own expanding local economy. Steady growth in total employment has averaged 5.0% annually between 2004 and 2009, and in the period between October 2009 and October 2010, job growth continued at 4.2%. Moody's notes that the borough's unemployment rate tends to be higher than that of Anchorage and the state; the borough's October, 2010 unemployment rate of 8.3% remains above the state rate of 7.6% but below the national rate of 9.0%. Anchorage's rate in the same period was 6.5%.

The borough covers a vast 24,500 square miles bordering Anchorage to the south and including Denali State Park, as well as Denali National Park to the north. Key economic sectors include government, transportation, construction, utilities and retail trade. It is anticipated that the borough's economic growth will be stimulated by the ongoing development of Port Mackenzie, which will provide facilities for ferries and bulk carriers, an industrial park serving both the borough and Anchorage, and development of the Hatcher Pass ski facility.

HEALTHY FINANCIAL POSITION DEMONSTRATED BY AMPLE RESERVES

The borough's financial operations feature increasing revenues and controlled expenditures which combine to produce healthy general fund reserve levels. The borough's largest general fund revenue source is property taxes (accounting for 68.5% of general fund revenues in fiscal 2010); in 2005 the borough implemented a new tax levy cap which limits growth to changes in CPI and population. Fiscal 2010 general fund balance represented a healthy 52.6% of general fund revenues ($56.9 million). Officials report that operations in fiscal 2011 are balanced. As such, total fund balance will remain well above the borough's reserve policy, which calls for reserves at approximately 25% of general fund operating expenses. Moody's deems operations of the borough's school system as a fundamental component of borough's overall operations. Since the school system does not maintain significant reserves in its funds, the general fund reserve provides flexibility for all key financial operations. In 2010, general fund reserves represented 20.0% of combined general, debt service and school operations. While this level of reserves remains satisfactory given the borough's essentially balanced operations, going forward we will continue to evaluate the borough's financial flexibility in the context of all of its operations, including the school system.

LOW ADJUSTED DEBT BURDEN

Moody's believes that the borough's debt position will continue to be modest given state reimbursement of school bonds and limited future borrowing plans. Proceeds of the current issue will be used to fund school projects. Approximately 90% of the borough's outstanding debt is eligible for state school construction reimbursement as well as a small additional amount for other projects. After adjusting for state reimbursement of school bonds, the borough's debt burden is a low 0.4%; unadjusted overall debt burden is 2.5%. The majority of the borough's non-school capital needs are expected to be funded from state and federal sources as well as pay-as-you-go financing.

What could move the rating - UP

- Substantial appreciation in socioeconomic measures

- Significant improvement in economic diversity

What could change the rating - DOWN

- Substantial deterioration of financial position

- Prolonged downturn in the local economy

KEY STATISTICS:

2009 estimated population: 84,314

2007 estimated per capita income: $23,945 (85.6% of state)

2007 estimated median family income: $68,458 (95.1% of state)

2007 estimated median housing value as % of state median: 91.4%

2011 full valuation: $8.21 billion

Average annual growth in full value, 2006-2011: 7.7%

Full value per capita: $97,370

FY 2010 general fund balance: $56.9 million (52.6% of general fund revenues)

FY 2010 operating funds balance: $59.4 million (20.0% of operating funds revenues)

Gross direct debt burden: 2.5%

Overall debt burden: 2.6%

Adjusted debt burden: 0.4%

Payout of principal (10 years): 75.2%

PRINCIPAL METHODOLOGY

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

Patrick Ford
Analyst
Public Finance Group
Moody's Investors Service

Matthew A. Jones
Backup Analyst
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 MATANUSKA-SUSITNA BOROUGH, ALASKA G.O. BONDS
No Related Data.
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