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MOODY'S ASSIGNS Aaa RATING TO DOUGLAS COUNTY'S (NE) $9.1 MILLION GENERAL OBLIGATION REFUNDING BONDS, SERIES 2011

11 Feb 2011

Aaa RATING AFFECTS $63.5 MILLION IN POST-SALE GOULT DEBT

County
NE

Moody's Rating

ISSUE

RATING

General Obligation Refunding Bonds, Series 2011

Aaa

  Sale Amount

$9,100,000

  Expected Sale Date

02/17/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Feb 11, 2011 -- Moody's Investors Service has assigned a Aaa rating to the Douglas County's (NE) $9.1 million General Obligation Refunding Bonds, Series 2011. Concurrently, Moody's has affirmed the Aaa rating on Douglas County's (NE) $63.5 million of previously issued General Obligation Unlimited Tax debt, including the current offering.

SUMMARY RATINGS RATIONALE

Debt service payments are secured by the county's general obligation unlimited tax pledge, and bond proceeds from the Series 2011 Bonds will refund the county's outstanding Series 2005 General Obligation Bonds for an estimated net present value savings of 4.65%. The Series 2005 Bonds were originally issued to finance the cost of additions and improvements to the existing health care facilities of the county. Assignment and affirmation of the Aaa rating reflects the county's sizeable and expanding tax base; sound financial position despite recent draws on reserves; and a manageable debt profile.

STRENGTHS

-Significant revenue raising flexibility

-Economic center of Nebraska

CHALLENGES

-Narrowing General Fund reserves

DETAILED CREDIT DISCUSSION

COUNTY SERVES AS ECONOMIC HUB OF NEBRASKA

The county's sizeable $35.9 billion tax base will continue to expand, given its regional importance as an economic hub, and availability of developable land. Located in eastern Nebraska (certificates of participation rated Aa2/ stable outlook), Douglas County is the state's most populous county and includes the City of Omaha (rated Aaa/ stable outlook). The area's diverse economy is anchored by insurance and other financial services, food processing, health care, higher education, manufacturing, transportation, trade, and important US military activity. Driven primarily by economic activity within the City of Omaha and development of the western portion of the county, the county's tax base growth increased at a steady rate of 4.3% over the last five years. Many of redevelopment initiatives completed in recent years within Omaha include substantial riverfront development, driven largely by the $140 million Gallup Redevelopment Plan. The Gallup Redevelopment Plan encompasses the complete redevelopment of a 130-acre area including public streets, a recreation area, and parking structure. In addition, a major feature of the Gallup Redevelopment Plan is the Gallup Corporation's relocation of its headquarters to this area. Accompanying substantial public improvement projects in this area is also the newly constructed $135 million Omaha World Herald facilities, a $265 million office tower and data center of First National Bank of Omaha, and a new headquarters for Union Pacific Railroad.

Two mixed use, commercial and residential projects under construction are the $300 million Mutual of Omaha project, a seven-building project which will include 300 apartments, 300 condo units and a new hotel, and the Aksarben Village which includes retail and residential components. Both projects are expected to fuel economic activity adjacent to the developments over the long term. Resident income levels meet national norms, with per capita and median family incomes equivalent to 106% and 109.2% of national figures, respectively, with a solid full value per capita of $70,473. Unemployment, at 4.9% for October 2010, is above the state rate of 4.2% but well below the national rate of 9.0% for the same time period.

STABLE FINANCIAL OPERATIONS DESPITE RECENT DRAW OF RESERVES

The county's financial position will remain strong in the near term due to the presence of sound reserves and the taxing margin it enjoys under the property tax lid. The county has substantial revenue flexibility under the statutory 50-cent property tax lid, allowing the county to generate additional property tax revenues if needed. In FY2010, the county's property tax rate levy of 24.519 remained unchanged from fiscal 2009; however officials increased the levy for fiscal 2011 to 26.459, which remains well below the statutory cap. At fiscal year-end 2008, following several years of General Fund operating surpluses, the county's General Fund balance stood at $75.8 million, or an ample 46.4% of General Fund revenues. However, in fiscal 2009 the county had a $6.7 million operating deficit, after a planned transfer of $10.2 million to support non- major fund operations. The county has historically made the transfer out to fund other operations, but the deficit in 2009 resulted from increased general governmental and public safety expenditures. Despite the large draw on fund balance, fiscal 2009 ended with a General Fund balance of $69.2 million, or a favorable 42.3% of General Fund revenues. For fiscal 2010, the county's adopted budget included an operating deficit to finance capital expenditures. However, revenue weakness related to falling interest income and inheritance taxes as well as higher than budgeted expenditures in public safety, the operating deficit grew to $7.9 million before the historical transfer out of approximately $10 million. When factoring in the transfer out, audited results for fiscal 2010 show a total General Fund deficit of $16.6 million drawing the General Fund balance down to a still satisfactory $53.6 million or 33.5% of General Fund revenues.

For fiscal 2011, the county adopted a balanced General Fund budget including the normal transfer out to other operations. A balanced budget was achieved through increasing the property tax rate, which officials expect will generate $4 million in property tax revenues and across the board departmental expenditure cuts of 4%. With 50% of the fiscal year complete, officials report revenue and expenditures are on target and do not expect to draw on General Fund reserves in fiscal 2011. Despite the recent narrowing of the county's General Fund reserves, we expect management's commitment to maintain the fund balance at current levels through revenue enhancements and expenditure modifications is consistent with our expectations for Aaa-rated entities.

MANAGEABLE DEBT BURDEN

We expect the county's moderate 0.2% direct debt burden (3.5% overall) will remain affordable, given the county's limited plans for future borrowing. In the near term, the county may seek $10 to $15 million of additional financing for the renovation and construction of a regional crime lab and indoor K-9 unit; though officials indicate utilizing Federal Drug Forfeiture funds for a large portion of the costs. Principal amortization is above average, with 74.4% paid within ten years. All of the county's debt is fixed rate and the county is not a party to any interest rate swap agreements.

What could change the rating- DOWN

-Inability to close budgetary gaps leading to deterioration of financial reserve levels below similarly rated entities

-Erosion of the local economy and tax base reflected in increased unemployment levels and declining tax base valuation

KEY STATISTICS

2000 Census population: 463,585

2009 Estimated population: 510,199

2010 Full Value: $35.9 billion

Estimated Full Value per capita: $70,473

Direct Debt: 0.2%

Overlapping Debt: 3.5%

Payout (10 years): 74.4%

Fiscal 2010 General Fund balance: $ 53.5 million (33.5% of General Fund revenues)

Unemployment Rate (October 2010): 4.9%

2000 Per Capita Income as a % of State: 116.7% (106.0% of US)

2000 Median Family Income as a % of State: 113.8% (109.2% of US)

Post-sale GOULT debt outstanding: $63.5 million

PRINCIPAL METHODOLOGY USED

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, confidential and proprietary Moody's Investors Service 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

Tatiana Killen
Analyst
Public Finance Group
Moody's Investors Service

Nora Wittstruck
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

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


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MOODY'S ASSIGNS Aaa RATING TO DOUGLAS COUNTY'S (NE) $9.1 MILLION GENERAL OBLIGATION REFUNDING BONDS, SERIES 2011
No Related Data.
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