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MOODY'S ASSIGNS Aa3 RATING TO THE VILLAGE OF MONEE'S $2.2 MILLION GENERAL OBLIGATION REFUNDING BONDS, SERIES 2010

15 Nov 2010

Aa3 RATING APPLIES TO $7.1 MILLION OF POST SALE GENERAL OBLIGATION DEBT

Municipality
IL

Moody's Rating

ISSUE

RATING

General Obligation Refunding Bonds, Series 2010

Aa3

  Sale Amount

$2,200,000

  Expected Sale Date

11/16/10

  Rating Description

General Obligation Unlimited Tax

 

Opinion

NEW YORK, Nov 15, 2010 -- Moody's Investors Service has assigned a Aa3 rating to the Village of Monee's (IL) $2.2 million General Obligation Refunding Bonds, Series 2010. Concurrently, we have affirmed the village's outstanding Aa3 general obligation rating. Post-sale the village will have $7.1 million of outstanding general obligation debt.

RATINGS RATIONALE

The bonds are secured by the village's outstanding general obligation unlimited tax pledge. The proceeds will refund various existing outstanding obligations of the village for restructuring and interest rate savings. Assignment of the Aa3 rating reflects the village's modestly sized residential tax base favorably located south of Chicago (GO rated Aa3/stable outlook) in suburban Will County (GO rated Aa2), satisfactory financial operations with healthy reserves, financial flexibility derived from home-rule status, and a manageable debt profile.

MODESTLY SIZED RESIDENTIAL TAX BASE FAVORABLY LOCATED SOUTH OF CHICAGO EXPERIENCING SOLID POPULATION GROWTH

Located 32 miles south of Chicago in Will County, the village continues to experience solid population growth, primarily due to its favorable location within the Chicago metropolitan economy and ample remaining land for development. Population for the village, currently at 4,993 residents, is up almost 380% between 1990 and 2008. According to Will County, from 2000 through 2006 Will County had the most population growth in the state and was the 10th fastest growing county in the US. Favorably, the village is located where residents can commute in multiple directions to various employment centers. While village development is primarily residential (85% of 2009 valuation) in nature, the village benefits from retail and commercial activity along Interstate 57, particularly in the form of warehousing facilities, as well as gas and diesel fueling stations. The village's full valuation, currently a modest $457 million, has grown at a solid average annual rate of 11.2% over the last five years. The annual growth rate peaked at 18.7% in 2005 and has since tapered down to a more moderate 3.1% in 2009. Favorably, median family income and per capita income have increase steadily over the past three census counts, reaching 117.0% and 119.8% of the state averages, respectively, in the 2000 census. Will County's unemployment rate was 9.7% in August 2010, approximating state and national unemployment rates.

SOUND FINANCIAL OPERATIONS BENEFITING FROM HEALTHY RESERVES AND FINANCIAL FLEXIBILITY AFFORDED BY HOME-RULE STATUS

On an operating basis, the village expects the General Fund to end fiscal 2010 with a deficit of approximately $200,000. However, a prior period accounting adjustment will increase the General Fund balance by approximately $330,000, giving the General Fund a small overall increase. For fiscal 2011 the village enacted some simple expenditure reductions, and has a balanced budget. The village's financial operations have improved over the past five years as management has sought to steadily grow operating reserves. After recording five consecutive operating surpluses, the village closed fiscal 2009 with a $1.7 million General Fund balance (or a relatively healthy 63.4% of General Fund revenues). Officials cite an informal policy to maintain operating reserves equivalent to $1.4 million, or approximately 50% of annual operating expenditures. Additionally, the village maintains healthy reserve balances in the Road & Bridge and TIF Fund ($312,000 and $2.5 million, respectively, at the close of fiscal 2009). Though these balances are restricted in their potential uses, the additional reserves help to further buffer the General Fund balance from potential contingencies associated with road projects and capital investment within the village's three TIF districts.

The village is home rule, a designation approved by voters in 1996. As a result, the village is not subject to levy limits, has no statutory debt ceiling, and can impose or increase a variety of taxes, providing a considerable degree of financial flexibility. The village has a diverse revenue stream which includes sales taxes (40% of General Fund revenues in fiscal 2009) followed by property taxes (14%) and state shared income tax receipts (14%). Sales tax receipts for the village are highly concentrated in revenues generated from gas and filling stations within Monee's boundaries. For the five years ending fiscal 2009 sales tax receipts were relatively stable, averaging just over $1 million annually. However, sales tax revenues can be volatile, and fiscal 2010 revealed this vulnerability. The village's interstate exchange was under construction for all of fiscal 2010, and as a result, sales tax revenues were down 34% as the bulk of receipts are generated by businesses near the interchange. Favorably, General Fund reserves are not expected to decline and as of fiscal 2011 construction has been completed.

MANAGEABLE DEBT PROFILE WITH AGGRESSIVE PRINCIPAL AMORTIZATION

The village's debt burden should remain manageable given a modest direct debt burden and lack of additional near-term borrowing needs. The village's overall debt burden is above average at 4.4%, due mostly to overlapping units (significantly, the local schools). Favorably, the village's direct obligations constitute a moderate 1.6% of assessed valuation. Principal amortization is aggressive with 95% retired within ten years. Nearly 95% of the village's outstanding general obligation debt is supported by TIF revenues, substantially mitigating the impact of the debt burden on the property tax levy. The current bonds will refund all of the village's existing variable rate debt. Therefore, post-sale all of the village's debt will be fixed rate and will not have exposure to any derivative agreements. Officials have no plans to issue additional debt over the next several years.

WHAT COULD CHANGE THE RATING-UP:

-Significant expansion and diversification of the city's tax base;

-Sustained structural balance within the city's General Fund bolstering reserves;

-Significant decrease in the city's overall debt burden.

WHAT COULD CHANGE THE RATING-DOWN:

-Substantial deterioration in the city's financial reserves below similarly rated entities;

-Notable decrease in the health of the city's residential housing market that negatively affects both valuations and property tax collections.

KEY STATISTICS FOR THE VILLAGE OF MONEE

2008 Population (estimate): 4,993 (+70.8% since 2000 Census)

2000 Per capita income as a % of state: 119.8% (128.3% of US)

2000 Median family income as a % of state: 117% (129.8% of US)

Will County unemployment rate (August 2010): 9.7% (IL at 9.9%, US at 9.5%)

2009 Full valuation: $457 million

Fiscal Year 2009 General Fund balance: $1.7 million (63.4% of General Fund revenues)

Post-sale GOULT debt outstanding: $7.1 million

Debt burden: 4.4% (1.6% direct)

Principal payout (10 years): 95.2%

PRINCIPAL METHODOLOGY

The principal methodology used in rating the Village of Monee, 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

Henrietta Chang
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


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MOODY'S ASSIGNS Aa3 RATING TO THE VILLAGE OF MONEE'S $2.2 MILLION GENERAL OBLIGATION REFUNDING BONDS, SERIES 2010
No Related Data.
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