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MOODY'S ASSIGNS MIG 1 RATING TO GREENE COUNTY'S (OH) $1.3 MILLION VARIOUS PURPOSE BOND ANTICIPATION NOTES, SERIES 2010D

18 Oct 2010

AFFIRMS Aa2 RATING ON $50.7 MILLION OF POST-SALE GOLT DEBT

County
OH

Moody's Rating

ISSUE

RATING

Various Purpose (General Limited Tax) Bond Anticipation Notes, Series 2010D

MIG 1

  Sale Amount

$1,300,000

  Expected Sale Date

10/19/10

  Rating Description

Bond Anticipation Notes

 

Opinion

NEW YORK, Oct 18, 2010 -- Moody's Investors Service has assigned a MIG 1 rating to Greene County's (OH) $1.3 million Various Purpose (General Limited Tax) Bond Anticipation Notes, Series 2010D. Concurrently, Moody's has affirmed the Aa2 rating on the county's outstanding general obligation limited tax debt, affecting $50.7 million.

RATINGS RATIONALE

The notes are secured by the county's general obligation limited tax pledge, subject to the 10 mill limitation. Proceeds of the notes will be used to refund bond anticipation notes maturing November 3, 2010, which were originally issued for various capital improvements. Additionally, approximately $70,500 of the maturing notes will be refunded with cash on hand. The notes mature in one year and the MIG 1 rating is based on expected market access for the take out refinancing, a history of successful marketing of bonds and notes, and the credit quality reflected in the county's Aa2 long-term rating. Affirmation of the Aa2 rating reflects the county's steady tax base growth benefitting from the presence of Wright Patterson Air Force Base; solid financial operations with strong General Fund reserves; and modest direct debt burden.

FAVORABLE MARKET ACCESS ANTICIPATED GIVEN FREQUENT ACCESS TO LONG AND SHORT-TERM CAPITAL MARKETS

The county's strong history of market access in both short-term and long-term capital markets is evidenced by six general obligation bond offerings in the last three years and several short-term note and certificate sales annually, including three in the last year. The county received eight bids at its most recent competitive note sale in June 2010. Authorization for the take out financing is based on the original authorizing resolution, allowing the county to roll the notes or issue long-term debt. The county plans to roll the current issuance into another series of notes or to convert it into long-term bonds before it matures on November 2, 2011. Many Ohio (GO Aa1/negative outlook) counties keep a portion of their debt in notes in order to access more favorable short-term rates and to allow for flexibility to pay down principal upon annual renewal of the notes. Management is expected to make adequate provisions to address potential market disruptions at the time of the takeout financing, by planning to take out debt well in advance of final maturity and considering alternate back up plans if necessary.

SOUTHWESTERN OHIO COUNTY NEAR DAYTON BENEFITING FROM EXPANSIONS AT WRIGHT PATTERSON AIR FORCE BASE

Located in southwestern Ohio directly adjacent to the city of Dayton (GOLT rated Aa2/stable outlook) and encompassing the Wright Patterson Air Force Base, the county's local economy is intertwined with both the city of Dayton and the air force base. While the Dayton metropolitan area has experienced challenges due to the loss of National Cash Register, Delphi, and General Motors (corporate family rating Ba2/stable outlook) over the last five years, Wright Patterson Air Force Base has continued to see growth as a result of the 2005 Base Realignment and Closure (BRAC) recommendations. The base, which employs approximately 27,000 individuals, is in the process of an estimated $332 million in construction and renovation activity associated with the BRAC recommendations and is set to add an additional 1,200 military and civilian positions by September 2011. The multiplier effects of the expansion are expected to lead to additional regional jobs at suppliers and related businesses, as well as residential development to accommodate the new employees. The county has benefitted from this growth, particularly in the western portion which includes the cities of Beavercreek (GOLT rated Aa2) and Fairborn (GOLT rated Aa2). Population in this primarily residential county grew 8.2% from 1990 to 2000 and an estimated 7.6% from 2000 to 2008. Additionally, the county's $11.06 billion tax base saw an average annual increase of 3.9% over the last five years, with a strong 8.5% growth following its 2008 sexennial reappraisal. We expect the county's tax base will continue to grow at a moderate pace due to the air force base expansion and extension of the local transportation network in the eastern portion of the county.

The eastern portion of the county is still fairly rural, and approximately 72% of the county's total acreage is agricultural. Route 35's increase to four lanes throughout the county is expected to spur additional growth on the eastern side. Greene Town Center (which opened in 2005) and Fairfield Commons Mall, both located in the western portion of the county, serve as a retail and shopping destination for the surrounding region and support county sales tax receipts. Resident income levels approximate state and national norms with per capita income and median family income levels equivalent to 106.8% and 115.8% of national levels, respectively, in the 2000 census. Despite growth at the air force base, the county is not immune to the economic challenges facing the Dayton metropolitan area, with an unemployment rate of 9.6% in August 2010, approximating both state (9.7%) and national (9.5%) rates.

STABLE FINANCIAL OPERATIONS EXPECTED TO CONTINUE DESPITE DEPENDENCE UPON ECONOMICALLY SENSITIVE SALES TAX REVENUES

We expect the county's financial operations will remain stable given satisfactory General Fund liquidity and generally conservative budgeting practices. In fiscal 2008, officials budgeted for a 2% overall increase in revenues, though actual revenues reflected a 2% overall decline, yielding a $1.4 million operating deficit and an ending General Fund balance of $12.1 million, or a still healthy 26.1% of General Fund revenues. Favorably, the county enacted a 4% reduction in its operating budget in fiscal 2009 to match projections of declining sales tax and property transfer receipts, and fiscal 2009 ended with a $1.6 million operating surplus, bringing General Fund reserves to $14.3 million, or a solid 32.4% of General Fund revenues. In fiscal 2010, the county reduced its budget by 2% starting July 1st to provide a cushion in case of negative variances. Positively, management reports that revenues have come in as budgeted year-to-date and sales tax revenues are performing better than expected. The county currently expects to have balanced operations in fiscal 2010. The county remains committed to maintaining a year-end unencumbered cash balance of at least 10% of annual General Fund expenditures, and the county's fund balance includes $2 million designated for budget stabilization, which the county has never needed to spend.

Sales tax revenues account for approximately 45% of operating revenues and are sensitive to fluctuation with economic conditions. The county experienced steady growth in this revenue stream through fiscal 2007, averaging 3.0% annual growth over the prior five years. Given regional and economic trends, management budgeted for a 5% decline in sales tax revenues in fiscal 2009 but favorably receipts were down by only a modest 1.9% from the prior year. For fiscal 2010, management budgeted a further 2% decline in sales tax receipts from fiscal 2009, but has seen a 1% year-over-year increase. Similar to most Ohio counties, Greene County relies upon a number of voter authorized levies to support various social services, including the 1.5 mill Community Mental Health and 1 mill Council on Aging levies, both of which were renewed by a strong margin in November 2009.

MODEST DIRECT DEBT BURDEN WITH BELOW AVERAGE PRINCIPAL AMORTIZATION

We anticipate the county's overall debt position will remain moderate, given current debt levels (overall debt burden at 2.6% of full value, direct debt at 0.4%) and the ongoing use of pay-as-you-go financing for capital projects. The rate of repayment of general obligation principal is below average, with 46.1% of principal retired within ten years. The county has no additional general obligation borrowing plans at this time, though is issuing water and sewer revenue bonds for system improvements in conjunction with the current borrowing. All of the county's outstanding debt is fixed rate, and the county is not a party to any interest rate swap agreements.

What could change the rating - UP

- Strengthening of tax base and demographic profile

- Maintenance of positive fund balance growth

What could change the rating - DOWN

- Material multi-year declines in fund balances and liquidity

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

KEY STATISTICS:

2000 Population: 147,886 (8.2% increase since 1990)

2009 Population Estimate: 159,823 (8.1% increase since 1990)

2010 Full market valuation: $11.06 billion (3.9% average annual increase since 2005)

Estimated full value per capita: $69,205

Per capita income as % of U.S. (1999): 106.8%

Median family income as % of U.S. (1999): 115.8%

County unemployment rate (August 2010): 9.6%

FY2009 General Fund balance: $14.3 million (32.4% of General Fund revenues)

Debt burden: 2.6% (0.4% direct)

Principal amortization (10 years): 46.1%

Post-sale short-term general obligation limited tax debt outstanding: $9.6 million

Post-sale long-term general obligation limited tax debt outstanding: $50.7 million

PRINCIPAL METHODOLOGY

The principal methodology used in rating Greene (County of) OH was Bond Anticipation Notes and Other Short-Term Capital Financings rating methodology published in May 2007. 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.

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

Emily Robare
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


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MOODY'S ASSIGNS MIG 1 RATING TO GREENE COUNTY'S (OH) $1.3 MILLION VARIOUS PURPOSE BOND ANTICIPATION NOTES, SERIES 2010D
No Related Data.
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