Global Header | Moody's
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
New Issue:

MOODY'S ASSIGNS Aa2 UNDERLYING AND Aaa ENHANCED (PSF) RATINGS TO CONROE ISD (TX) $84M ULT REFUNDING BONDS, SERIES 2011

11 May 2011

AFFECTS $913M IN OUTSTANDING PARITY DEBT

Primary & Secondary Education
TX

Moody's Rating

ISSUE

UNDERLYING
RATING

RATING

Unlimited Tax Refunding Bonds, Series 2011

Aa2

Aaa

  Sale Amount

$83,975,000

  Expected Sale Date

05/16/11

  Rating Description

General Obligation Unlimited Tax/Texas PSF Guarantee

 

Opinion

NEW YORK, May 11, 2011 -- Moody's Investors Service has assigned a Aa2 underlying rating to Conroe Independent School District's (TX) $84 million Unlimited Tax Refunding Bonds, Series 2011. Concurrently, we have affirmed the Aa2 underlying rating on the district's $913 million in outstanding parity debt. In addition to the underlying rating, we have assigned a Aaa enhanced rating to the current sale provided by a guarantee of the Texas Permanent School Fund (PSF). Proceeds from the current sale will refund certain maturities of the district's 01A, 03, 03A, 04A and 05C bonds for net present value savings with no extension of final maturity.

RATINGS RATIONALE - UNDERLYING

The bonds are secured by a continuing and direct annual ad valorem tax, levied against all taxable property in the district, without legal limitation as to rate or amount. The Aa2 rating additionally reflects the district's sizeable tax base, healthy financial reserves, and elevated debt profile driven by rapid enrollment growth.

RATINGS RATIONALE - ENHANCED

The Aaa rating reflects our assessment of the PSF's ability to make payments on the guarantee relative to the substantial value of the fund corpus. Additional credit considerations include: the PSF's constitutionally protected corpus, the general obligation credit quality of the Texas school district guaranteed by the fund, an investment portfolio that provides satisfactory coverage and liquidity given our estimated probability of calls on the guarantee, and strong legal mechanics that facilitate timely reimbursement to the PSF should guarantee payments occur. The enhanced rating also reflects an expected increase in PSF leverage to no more than 3.5 times PSF cost value. For additional information on the PSF program, please see Moody's High Profile Ratings Update "Texas Permanent School Fund (PSF)" dated April 2010.

STRENGTHS

*Continued tax base expansion and diversification

*Favorable socioeconomic profile

CHALLENGES

*Elevated debt profile to accommodate rapid enrollment growth

*Future capital needs

DETAILED CREDIT DISCUSSION

TAX BASE GROWTH EXPECTED TO CONTINUE, ALBEIT AT A SLOWER PACE

Conroe Independent School District serves students in Montgomery County (general obligation rated Aa2). The high-growth area is located just north of Harris County (Aaa with a stable outlook). The 354 square mile district encompasses a portion of the Woodlands as well as the City of Conroe (Aa2). Growth in the Woodlands and in Conroe has helped diversify the district's tax base values with healthcare, manufacturing, retail and tourism. Ease of access to Houston's business center has recently improved with the widening of Interstate Highway 45, encouraging significant housing development along the corridor. As such, the district's population has increased approximately 49% since the 2000 U.S. Census to an estimated 250,000 residents. Wealth levels within the district are high with per capita income and median family income (from 2000 U.S. Census) approximating 135.4% and 139.9% of state levels, respectively.

The district's tax base has experienced a favorable 9.0% average annual growth rate over the past five years, reaching $20.3 billion in fiscal 2011. Although the pace of growth slowed to 3.8% in the most recent year, Moody's believes the continued growth in assessed valuation is a credit strength during a time when a majority of municipalities across the state and nation are experiencing declining property values. Officials conservatively project 1% growth in assessed valuation for fiscal 2012. Moody's believes taxable value growth may remain below historical levels, however, positive growth is expected to continue given land remaining available for development.

STABLE FINANCIAL OPERATIONS; GENERAL FUND SUPPORT FOR DEBT SERVICE OBLIGATIONS

The district has historically maintained a strong financial position as a result of conservative budgeting practices and increasing operating revenues from tax base and student enrollment growth. The General Fund balance currently exceeds the adopted policy requiring reserves at 16% to 20% of budgeted operating expenditures. Beginning in fiscal 2008 the district began offsetting the debt service tax rate with surplus revenues from the General Fund. Transfers to Debt Service have ranged from a low of $13M to a peak of $33 million (4-11% of GF Operating expenditures). Fiscal 2009 reflects an $11.8 million increase in General Fund reserves, following a $13 million transfer to the Debt Service Fund. The surplus was due in part to the receipt of approximately $8 million of additional state funds to offset costs associated with providing free lunches to students after Hurricane Ike. The district drew $12.3 million from reserves in fiscal 2010, however, decreasing the General Fund balance to $75.7 million (21.7% of revenues). Management notes the $33 million transfer to the Debt Service Fund in fiscal 2010 was to cover debt service requirements in both fiscal 2010 and fiscal 2011. Given this two year transfer, the district is now a year ahead of itself in terms of transfers to the debt service fund such that in any year where the General Fund were unable to make the transfer, the district would have an opportunity to raise the debt service tax rate for the subsequent year's debt service payment. Moody's believes this timing helps mitigate the use of excess General Fund revenues for debt service. Officials currently project fiscal 2011 to yield essentially balanced operations after an expected $20 million transfer to the Debt Service Fund.

While the district's state aid level will benefit from moderated levels of enrollment growth, the district reports plans to offset expected net state aid cuts approximating $19 million for fiscal 2012 and 2013 largely through attrition and other operating cost reductions. A maximum of $1.5 minimum of fund balance is forecast to be appropriated in 2012, however, management reports further attrition would offset the need for this fund balance appropriation in the second year of the biennium. The district's O&M tax rate is currently $10.40/$1,000 of assessed value, which could be increased to a maximum $11.70 with voter approval. The debt service tax rate, which is unlimited, is currently $2.55/$1,000 reportedly ranking the district as one of the lower combined tax rates in the Houston MSA.

Moody's expects the General Fund balance, currently healthy at $72.4 million (20.8%) of revenues, to remain healthy despite state aid reductions and potential modest levels of fund balance appropriation for operations. Failure to restore structural balance and maintain satisfactory reserve levels could impact credit quality.

ABOVE AVERAGE DEBT LEVELS EXPECTED TO CONTINUE DUE TO GROWING FACILITIES NEEDS

The residential influx has spurred substantial enrollment growth. Enrollment has increased 3.8% on average annually over the past five years, resulting in 51,150 students for the 2010-2011 school year. District officials project enrollment growth will continue at approximate 1,500 additional students per year over the medium term. Due to vigorous enrollment growth, the district has regularly issued debt to provide the infrastructure necessary to accommodate new students. As a result, the debt burdens are elevated at 4.6% direct and 9.6% overall, both expressed as a percentage of fiscal 2011 full value. The debt profile includes $33 million of variable rate debt (Series 2001B), which is currently in annual mode with August 15, 2011 as the next reset date. The variable rate bonds are supported by external liquidity through a standby bond purchase agreement with Depfa (expires November 1, 2011). Officials report plans to remarket the Series 2001B bonds in fixed rate mode at the next reset date. The rate of amortization is sluggish with only 34.8% of principal retired in 10 years. The district has $246 million in authorized but unissued debt remaining. The district plans to issue additional debt on an annual basis and expects to deplete the authorization by 2014. Moody's expects the district will prudently manage future debt issuance in line with tax base expansion in order to maintain a manageable debt profile.

WHAT COULD CHANGE THE RATING-UP:

*Continued tax base expansion coupled with strengthened socioeconomic indices

*Trend of operating surpluses, significantly boosting General Fund reserves

WHAT COULD CHANGE THE RATING-DOWN:

*Substantial additional debt issuance absent corresponding tax base growth

*Depletion of General Fund balance

*Trend of tax base contraction

KEY STATISTICS:

Estimated Population: 250,000

FY 2011 Full Value: $20.3 billion

Full Value per Capita: $81,092

Per Capita Income (2000 U.S. Census): $26,554 (135.4% of state; 123.0% of U.S.)

Direct Debt Burden: 4.6%

Overall Debt Burden: 9.6%

Payout of Principal (10 years): 34.8%

FY 2010 General Fund Balance: $75.7 million (21.7% of General Fund revenues)

Post-Sale Parity Debt Outstanding: $913 million

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, public information and confidential and proprietary Moody's Investors Service 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

Robyn Rosenblatt
Analyst
Public Finance Group
Moody's Investors Service

Leslie Lukens
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 UNDERLYING AND Aaa ENHANCED (PSF) RATINGS TO CONROE ISD (TX) $84M ULT REFUNDING BONDS, SERIES 2011
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.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. 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 or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​
Global Footer | Moody's