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MOODY'S ASSIGNS MIG1 RATING TO ODESSA MONTOUR CENTRAL SCHOOL DISTRICT (NY) $8.3 MILLION G.O. BOND ANTICIPATION NOTES

16 Jun 2011

MOODY'S ASSIGNS AN A2 UNDERLYING RATING AND A1 ENHANCED RATING WITH A STABLE OUTLOOK TO ODESSA MONTOUR CENTRAL SCHOOL DISTRICT (NY) $6.1 MILLION OUTSTANDING PARITY DEBT

Primary & Secondary Education
NY

Moody's Rating

ISSUE

RATING

Bond Anticipation Notes

MIG 1

  Sale Amount

$8,337,387

  Expected Sale Date

06/16/11

  Rating Description

Bond Anticipation Notes

 

Opinion

NEW YORK, Jun 16, 2011 -- Moody's Investors Service has assigned a MIG1 to Odessa Montour Central School District (NY) $8.3 million G.O. Bond Anticipation Notes, 2011, dated June 16, 2011 maturing June 15, 2012. Concurrently, Moody's has also affirmed the A2 rating and a A1 enhanced rating with a positive outlook on the district's $6.1 million in previously issued parity debt, secured by the district's general obligation unlimited tax pledge. The proceeds of the BANs will be used to finance various school reconstruction projects throughout the district

RATING RATIONALE

The A2 underlying rating reflects the district's strong financial position and healthy reserve levels, small tax base with below average wealth levels, and above average debt burden.

The A1 enhanced rating with a stable outlook is based upon the additional security provisions offered by New York State's Section 99-B school intercept program, which authorizes the state to withhold future allotments of state aid in order to make bond payments in the event of default by the school district. While the program does not ensure avoidance of a pending default or guarantee immediate repayment, Moody's believes it does enhance the potential for recovery upon default and that the cure period is likely to be short.

STRENGTHS

-Healthy financial position and reserve levels

CHALLENGES

-High but manageable debt burden

-Small tax base with below average wealth levels

DETAILED CREDIT DISCUSSION

DEMONSTRATION OF MARKET ACCESS

The school district has historically enjoyed favorable access to capital markets, having received five bids for a note sale dated June 16, 2011 as well as five bids for a note sale dated June 18, 2010. All bids were received from major regional and national financial institutions. Given the town's demonstrated market access and underlying credit characteristic, the district should have sufficient access to capital markets at the notes' (date) maturity.

STABLE FINANCIAL POSITION WITH HEALTHY RESERVES

Moody's expects that Odessa Montour Central School District's financial position will remain stable due to a history of conservative financial management. The district's General Fund balance grew to $4.2 million or 29.8% of General Fund revenue from $2.5 million or 19.5% of General Fund revenue in fiscal 2007. The district's operations are structurally balanced as indicated by four years of operating surpluses. In fiscal 2010, the district ended the year with a $407,000 operating surplus driven by cost reductions as a result of the elimination of seven positions.

Fiscal 2011 year to date results indicate that the district will end the year balanced. The district's adopted budget assumed minimal growth ($72,877) over the fiscal 2010 adopted budget and included a $701,823 general fund balance appropriation. The fiscal 2012 adopted budget assumes 3.74% growth over the fiscal 2011 adopted budget and a slight increase in state aid. The district has appropriated $624,767 in general fund balance to balance the budget. Moody's believes management's conservative budgeting practices and adequate reserves will enable the district to maintain structural balance and ample reserves.

SMALL RESIDENTIAL TAX BASE WITH BELOW AVERAGE WEALTH LEVELS

The district is located in the Town of Odessa and provides educational services to eight towns throughout Schuyler County, Chemung County (A1) and Tompkins County (Aa1/Stable). The town is predominantly rural with employment opportunities in agriculture and in commuting to Corning (A1), Ithaca (Aa2) and Elmira (A3). Moody's expects the district's small $254.9 million tax base will remain relatively stable as indicated by 6.8% of average annual growth in full valuation since 2006. Wealth levels are below state and national averages with per capita income at 73.6%% of the state and179.8% of the US and median family income at 82.3% of the state and 85% of the US. Full value per capita is below average at $42,899 ($81,446 state median) in 2010.

MANAGEABLE DEBT BURDEN WITH RAPID PRINCIPAL PAYOUT

Moody's believes that the district's direct debt burden will remain manageable despite being 5.9% of full valuation, as the district's outstanding principle retirement is rapid with 100% of principle to be repaid within ten years. Debt service comprises 7.3% of the total operating budget and overall debt burden is 6.2% of full valuation which primarily includes overlapping debt with Schuyler, Chemung and Tompkins County. The $8.8 million in BAN proceeds and $462,613 in budgetary appropriation will be used to redeem $3.1 million and $5.6 million in notes maturing on June 17, 2011. The notes were authorized to fund a portion of the district's $10.37 million facility replacement project. All of the district's debt is fixed rate with no exposure to derivatives.

What could make the rating go UP:

-Significant tax base expansion

-Improved socio-economic profile

What could make the rating go DOWN:

-Increase in debt burden

- Decline in general fund balance and reserves

KEY STATISTICS:

2000 Population: 5,942

2010 Full Valuation: $254,906 million

2010 Full Value Per Capita: $42,899

1999 Per Capita Income (as % of PA and US): $17,224 (73.6% and 79.8%)

1999 Median Family Income (as % of PA and US): $42,524 (82.3% and 85%)

Direct Debt Burden: 5.9%

Overall Debt Burden: 6.2%

Payout of Principal (10 years): 100%

FY10 General Fund balance: $ 4.2 million, (29.8% of General Fund revenues)

Post-sale parity rated debt outstanding: $6.1 million

The principal methodology used in this rating was Bond Anticipation Notes and Other Short-Term Capital Financings published in May 2007

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings and 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

Shannon McCue
Analyst
Public Finance Group
Moody's Investors Service

Robert Weber
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 MIG1 RATING TO ODESSA MONTOUR CENTRAL SCHOOL DISTRICT (NY) $8.3 MILLION G.O. BOND ANTICIPATION NOTES
No Related Data.
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