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New Issue:

MOODY'S ASSIGNS Aa2 RATING TO PENNINGTON COUNTY'S (SD) $38.0 MILLION CERTIFICATES OF PARTICIPATION, SERIES 2010A, SERIES 2010B, AND SERIES 2010C

22 Oct 2010

Aa2 AFFIRMATION AFFECTS $54.8 MILLION POST-SALE PARITY DEBT

County
SD

Moody's Rating

ISSUE

RATING

Taxable Certificates of Participation, Series 2010A

Aa2

  Sale Amount

$7,930,000

  Expected Sale Date

11/02/10

  Rating Description

Certificates of Participation (GOLT)

 

Taxable Certificates of Participation, Series 2010B

Aa2

  Sale Amount

$29,350,000

  Expected Sale Date

11/02/10

  Rating Description

Certificates of Participation (GOLT)

 

Certificates of Participation, Series 2010C

Aa2

  Sale Amount

$3,110,000

  Expected Sale Date

11/02/10

  Rating Description

Certificates of Participation (GOLT)

 

Opinion

NEW YORK, Oct 22, 2010 -- Moody's Investors Service has assigned a Aa2 rating to Pennington County's (SD) $7.9 million Taxable Certificates of Participation, Series 2010A (GOLT-Recovery Zone Economic Development), $29.4 million Taxable Certificates of Participation, Series 2010B (GOLT-BABs), and $3.1 million Certificates of Participation, Series 2010C (GOLT). Concurrently, Moody's has affirmed the Aa2 rating on $54.8 million of its outstanding rated debt, including the current issue.

RATING RATIONALE

Certificate security is provided through the lease agreement requiring the county to include in its annual budget funds sufficient to pay for all lease payments. The county's obligation to make lease payments is backed by its absolute and unconditional limited tax pledge, not subject to appropriation. Bond proceeds will finance the acquisition, construction, and renovation to the county's evidence and administration buildings, as well as, various other capital projects. Assignment of the Aa2 rating reflects the county's solid economic base, the stabilizing influence of Ellsworth Air Force base, solid financial operations supported by healthy reserves, and favorable debt profile.

SIZEABLE TAX BENEFITS FROM TOURISM; ECONOMY EXPECTED TO REMAIN STABLE

Located on the state's western border, Rapid City (Sales Tax Rated A1) serves as the county seat for Pennington County which encompasses a large 2,800 square miles. The surrounding area is largely devoted to agriculture, with Rapid City itself serving as a regional economic hub for western South Dakota, and tourist center for the Black Hills region and Mt. Rushmore. Official report the regions tourism industry has held steady through the economic downturn. The county's moderate $6.9 billion tax base has grown at a solid 7.2% five year average annual rate with most recent growth evidencing some degree of moderation. Notably, 95% of the county's total population lives in Rapid City or neighboring Box Elder. While the county has seen some diversification, its employment base is still dominated by military and government sectors with Ellsworth Air Force Base employing approximately 3,800. Ellsworth was initially included on the preliminary BRAC list released in May 2005, but was excluded from the final list. The completion of a $30 million base housing project and a financial services call center creating up to 800 positions has helped to solidify Ellsworth's role, though exposure to potential future BRAC activity is an ongoing reality. Overall the Rapid City metro area and Pennington County in general is expected to continue a healthy economic expansion. County wealth levels slightly exceed state medians (though are below national levels), while its August unemployment rate of 3.9% compared favorably to both the state national rates of 4.4% and 9.5%, respectively for the same period.

SOLID FINANCIAL OPERATIONS EXPECTED TO CONTINUE

The county's financial operations are expected to remain solid due to prudent financial management and support provided from healthy reserves. After two consecutive years of reductions in reserves due to capital projects and increased public safety expenditures, the county realized consecutive surpluses in 2008 and 2009. The county's General Fund reserves have culminated to a healthy $14.6 million balance, or 31.7% of revenues. Favorably, despite the shortfalls in prior years, the county has maintained reserves above the formal policy of 20% of the next year's budget. Officials report 2010 operations are on track with the county's balanced budget. As a result of expanded jail capacity, the county is able to provide space both to surrounding counties and the U.S. Marshals which has generated favorable revenue trends. Officials expect 2011 General Fund operations to remain balanced.

Though counties in South Dakota are governed by hard property tax mill rate caps ($12.00 per $1,000 of A.V for the General Fund and $0.90 for its Building Fund), it is the allowable rate of levy growth which should be considered. Effective in 1997, the state limited growth in property taxes (allocated primarily to the General Fund and Building Fund) to the smaller of 3% or CPI, plus new construction, which potentially creates revenue-generating pressures on counties. We believe several factors mitigate these contraints and afford some operating flexibility despite these limitations. First, under state law the Pennington County (and all local governments), must assume only 95% collection rates on current property taxes. Notably, historical property tax collection rates have remained above this. Secondly, though it has not elected to do so (and will likely not), Pennington County could impose an excess levy with the approval of two-thirds of the county's commissioners. A protest petition signed by 5% of voters would require it to be successfully approved by a general referendum. We expect the county's financial operations will remain stable given sound management, healthy and liquid reserves, and some allowable flexibility.

FAVORABLE DEBT PROFILE; FUTURE BORROWING POSSIBLE

At 0.9%, Pennington County's direct debt burden (1.1% overall) is slightly above average. Like the General Fund, the county's Building Fund is subject to levy limits, though the growth limit is for the total county levy. The certificates constitute general obligations of the county and are not subject to appropriation. Although the current borrowing is subject to the Building Fund's 90 cent ceiling, officials expect to shift the allocation made between its general and building levies such that the impact on the total tax rate remains level. Officials may issue additional debt for capital projects outlined in the county's 20 year capital plan, though no formal plans for additional debt are currently in place.

What could change the rating - UP

- Preservation or improvement of General Fund balance at adequate levels over the near to medium term

- Maintenance of tax base and demographic profile

What could change the rating - DOWN

- Significant structural imbalance in the General Fund leading to material declines in fund balance and liquidity

- Deterioration of the district's tax base and demographic profile

KEY STATISTICS

2000 Census Population: 88,565

2009 Estimated Population: 98,533

2009 Full Value: $6.9 billion

2009 Full Value per Capita $69,827

2000 Per Capita Income as a % of State: 107.8% (87.7% of US)

2000 Median Family Income as a % of State: 103.6% (89.5% of US)

Direct Debt: 0.9%

Overall Debt: 1.1%

Payout (10 Years): 32.5%

Fiscal 2009 General Fund balance: $14.6 million (31.7% of revenues)

PRINCIPAL METHODOLOGY

The principal methodology used in rating the County of Pennington (SD) 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, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, 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

Iliana Beltran
Analyst
Public Finance Group
Moody's Investors Service

Elizabeth Foos
Backup Analyst
Public Finance Group
Moody's Investors Service

Edward Damutz
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

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MOODY'S ASSIGNS Aa2 RATING TO PENNINGTON COUNTY'S (SD) $38.0 MILLION CERTIFICATES OF PARTICIPATION, SERIES 2010A, SERIES 2010B, AND SERIES 2010C
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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