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Global Credit Research - 11 Oct 2016
New York, October 11, 2016 -- Issue: General Obligation Bonds, Election of 2006, Series 2016; Rating: A1; Rating Type: Underlying LT; Sale Amount: $56,552,357; Expected Sale Date: 10/12/2016; Rating Description: General Obligation
Issue: 2016 General Obligation Refunding Bonds (Grant), Series A; Rating: A1; Rating Type: Underlying LT; Sale Amount: $87,262,349; Expected Sale Date: 10/12/2016; Rating Description: General Obligation
Issue: 2016 General Obligation Refunding Bonds (North Sacramento & Rio Linda), Series B; Rating: A1; Rating Type: Underlying LT; Sale Amount: $56,465,000; Expected Sale Date: 10/12/2016; Rating Description: General Obligation;
Summary Rating Rationale
Moody's Investors Service has assigned an A1 rating to Twin Rivers Unified School District, CA's General Obligation Bonds, Election of 2006, Series 2016, 2016 General Obligation Refunding Bonds (Grant), Series A, and 2016 General Obligation Refunding Bonds (North Sacramento & Rio Linda), Series B. Concurrently, Moody's has also affirmed the A1 rating on the district's outstanding GO bonds and A3 rating on outstanding Certificates of Participation (COPs). The A1 rating reflects Twin Rivers Unified School District's large and growing tax base, with socio-economic indicators that fall below state and national medians; a financial position that has significantly improved and benefitted from the implementation of the Local Control Funding Formula. The rating additionally factors paydown of outstanding COP debt, however, a still high direct debt and overall debt burden, relatively weak debt structure and growing pension burden. The GO rating also incorporates the strength of the voter approved, unlimited tax pledge for the GO bonds, which are secured by ad valorem property taxes that are levied and collected by Sacramento and Placer Counties and transferred to the paying agent by Sacramento County, with the funds segregated outside of the district's operations.The two notch distinction between the GO rating and the A3 rating on the district's COPs reflects the weaker security pledge for lease-backed obligations and reflects the additional risk to certificate holders from the district's financial, operational, and economic conditions over the more secure general obligation pledge. Lease-backed obligations are contractual and conditioned on use and/or occupancy of the leased asset, effectively on parity with the district's other unsecured obligations.
Outlooks are usually not assigned to local government credits with this amount of debt outstanding.
Factors that Could Lead to an Upgrade
Significant improvement to the district's overall debt profile with a material decline in direct debt burdenSustained improvement in the district's overall financial positionMaterial improvement in the district's socio-economic position
Factors that Could Lead to a Downgrade
Material contraction in the district's overall assessed valueLarge and sustained declines in overall cash and reserve position
he general obligation offering is secured by an unlimited property tax pledge of all taxable property within the district boundaries. Debt service on the rated debt is secured by the district's voter-approved unlimited property tax pledge. The county rather than the district will levy, collect, and disburse the district's property taxes, including the portion constitutionally restricted to pay debt service on general obligation bonds.
Use of Proceeds
The proceeds of the General Obligation Bonds, Election of 2006, Series 2016 will be used to pay down a portion of the district's outstanding COPs. Proceeds from the 2016 General Obligation Refunding Bonds (Grant), Series A, and 2016 General Obligation Refunding Bonds (North Sacramento Rio Linda), Series B will be used to refund outstanding obligations for net present value savings to the district.
Twin Rivers Unified School District (TRUSD) located in Sacramento County was formed on July 1, 2008 as a merger of four school districts: Grant Joint Union High School District (JUHSD), North Sacramento, Rio Linda, and Del Paso Heights Elementary School Districts. The district encompasses 120 square miles in Sacramento County with a small portion extending into Placer County. The district serves over 28,000 students and operates 29 elementary, five junior high and four comprehensive high schools, three charter schools, one adult education school over several campuses and six alternative schools.
The principal methodology used in this rating was US Local Government General Obligation Debt published in January 2014. The additional methodology used in the lease backed rating was Lease, Appropriation, Moral Obligation and Comparable Debt of US State and Local Governments published in July 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
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