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MOODY'S ASSIGNS INITIAL A1 RATING TO CITY OF BRYAN'S(OH) $5.0 MILLION GOLT POLICE AND FIRE BUILDING CONSTRUCTION BONDS, SERIES 2011

01 Sep 2011

Municipality
OH

Moody's Rating

ISSUE

RATING

General Obligation Limited Tax Police and Fire Building Construction Bonds, Series 2011

A1

  Sale Amount

$5,000,000

  Expected Sale Date

09/14/11

  Rating Description

General Obligation Limited Tax

 

Opinion

NEW YORK, Sep 1, 2011 -- Moody's Investors Service has assigned an initial A1 rating to City of Bryan's (OH) $5.0 million General Obligation Limited Tax Police and Fire Building Construction Bonds, Series 2011.

SUMMARY RATINGS RATIONALE

The Series 2011 bonds are secured by the city's general obligation limited tax pledge, subject to the ten-mill limitation. Proceeds of the bonds will finance the majority of costs associated with the construction of a new public safety building. Total project cost is $7 million and the city will finance the remaining portion with $2 million in public safety reserves. Assignment of the A1 general obligation rating reflects the city's modestly sized tax base located 50 miles west of Toledo (general obligation rated A2/stable); stable financial operations that are heavily dependent upon economically sensitive income tax receipts; and affordable debt burdens with no concrete plans to issue new debt in the near term.

STRENGTHS

-Stable and healthy reserve levels

-2011 assessed valuation increased, reversing a multi-year trend of tax base declines

CHALLENGES

-Reliance on economically sensitive revenues

-Multi-year trend of significant declines in assessed valuation from 2008 to 2010

DETAILED CREDIT DISCUSSION

MODESTLY SIZED TAX BASE LOCATED 50 MILES WEST OF TOLEDO

We expect the city's modest $502 million tax base will remain relatively stable, following three years of sizeable declines, given a recent increase in assessed valuation in 2011. Comprising 5.5 square miles, the city is the county seat of Williams County. Residential values declined from 2008 through 2010, with annual assessed valuation declines of 5.3%, 3.6% and 8.0% respectively. Favorably, in 2011, assessed valuation increased by 2.8%. Officials report the city's largest employers are stable and some are expanding operations within the city. The city's tax base is predominantly residential, and commercial. Residential properties comprised 61.95% of the city's assessed valuation in 2011, while commercial properties comprised 37.18%. The city's largest employer is the Bryan Community Hospital and Wellness Center, which is currently undergoing a $62 million expansion project. The city has seen some declines within the manufacturing sector. In 2010, New Era of Ohio, a local pump manufacturer employing 138 people, closed its doors. Additionally, Global Suspension Systems, LLC, an automotive stamping company that employs 143 people at its Bryan plant recently announced the company will close its plant in the city. Favorably, Ruralogic, a local company dedicated to repatriating information technology, set-up headquarters in the city in 2010 and has a business plan that estimates the company will bring 363 new jobs to the area. Officials report that several local businesses including Spangler Candy Company, Chase Brass, 20/20 Custom Plastics, and Altenloh-Brinck & Co. U.S. Inc. are also planning expansions to existing local facilities.

The city's population increased by 2.5% from 2000 to 2010. The city's tax base is somewhat concentrated as the ten largest tax payers accounted for 9.8% of total assessed valuation in 2010. At 11.6% in June 2011, the unemployment rate for Williams County is elevated, tracking just well-above state (9.2%) and national (9.3%) levels for the same period. Wealth indices for the city track below national levels, with median family income and per capita income at 91.8% and 90.1% of national levels, respectively. We expect the city's tax base to remain stable as the result of the stabilization of residential property values.

STABLE FINANCIAL POSITION SUPPORTED BY SATISFACTORY RESERVES; SIGNIFICANT RELIANCE ON ECONOMICALLY SENSITIVE REVENUES

We believe the city's financial operations will remain stable as the result of prudent budgeting practices, despite a considerable reliance on income tax revenues, which comprised 75.2% of total General Fund revenues in fiscal 2010. In 2009, the city's primary operating funds were its General Fund, 1% Income Tax Fund and a portion of its Other Governmental Funds. The city ended 2009 with a healthy total operating fund balance of $6.8 million (or 83.9% of total operating revenues). In fiscal 2010, the city implemented GASB 54 and combined the 1% Income Tax Fund and a portion of its Other Governmental Funds into the General Fund, ending the year with a General Fund balance of $7.6 million (or 90.7% of total General Fund revenues). The increase in the General Fund in fiscal 2010 was largely attributable to a 4% increase in income tax revenues. Income tax receipts peaked in 2007 at $6.8 million. Subsequently, the economic recession drove receipts to decline in 2008 and 2009 by 2.7% and 8.5%, respectively. The recovery in 2010 brought receipts back up to $6.3 million, just short of pre-recession levels.

Officials expect the General Fund to end fiscal 2011 with a year-end General Fund balance of $6.3 million (or 75% of 2010 level General Fund revenues). This projected decrease is attributable to conservative income tax projections, an unplanned capital expenditure (the purchase of a new garbage truck) and an anticipated reduction in state aid of $73,000. Officials budgeted for a 10% reduction in income tax revenues in 2011, but report YTD receipts are trending at approximately 2% above 2010 levels. In 2012, the city is projecting General Fund reserves to remain at 2011 levels. The city does not have a formal fund balance policy, but officials abide by an informal guideline of maintaining a minimum General Fund balance of $1.5 million, a level the city has exceeded since 2009.

AFFORDABLE DEBT BURDEN WITH NO ADDITIONAL NEAR-TERM BORROWING PLANNED

We believe the city's debt burden will remain affordable due to a lack of near-term borrowing plans and affordable debt levels. At 1.5% of full value, the city's direct debt burden tracks above state and national medians. At 1.7%, the city's overall debt burden tracks below state and national medians. Principal amortization is slow, with 41.9% of principal retired in ten years. Officials report the city has no concrete plans to issue additional debt in the near-term, though the city is considering a potential lease option in the long-term in connection with a renewable energy project. Given affordable debt levels and a lack of near-term borrowing needs, we expect the city's debt profile will remain manageable. All of the city's outstanding debt is fixed rate and the city is not party to any interest rate swap agreements.

WHAT COULD CHANGE THE RATING UP:

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

-Substantial improvement in socio-economic indices and significant reduction in unemployment levels

WHAT COULD CHANGE THE RATING DOWN:

-Significant erosion of the city's tax base and/or weakening of socio-economic indices

-Deterioration in General Fund reserves to a level inconsistent with similarly rated credits

KEY STATISTICS

Census 2010 population: 8,545 (2.5% increase from 2000 population)

2011 estimated full market valuation: $502 million (2.5% average annual decrease since 2006)

Estimated full value per capita: $58,748

Per capita income as % of U.S. (1999): 90.1%

Median family income as % of U.S. (1999): 91.8%

Williams County Unemployment rate (June 2011): 11.6%

FY 2010 General Fund balance (GAAP): $7.6 million (90.7% of total General Fund revenues)

Debt burden: 1.7% (1.5% direct)

Principal amortization (10 years): 41.9%

Post-Sale GOLT debt: $5.0 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. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the 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 considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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 Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Analysts

Megan Roudebush
Analyst
Public Finance Group
Moody's Investors Service

Henrietta Chang
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

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


Moody's Investors Service, Inc.
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New York, NY 10007
USA

MOODY'S ASSIGNS INITIAL A1 RATING TO CITY OF BRYAN'S(OH) $5.0 MILLION GOLT POLICE AND FIRE BUILDING CONSTRUCTION BONDS, SERIES 2011
No Related Data.
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