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Rating Action:

Moody's Upgrades Charlotte, NC's Series 2003F,H; 2005A; 2008A, 2013B,C,G; 2015B; 2015 TIFIA COPs to Aa1 from Aa2

04 Oct 2016

Outlook Stable

New York, October 04, 2016 -- SUMMARY RATING RATIONALE

Moody's Investors Service has upgraded the rating of the City of Charlotte, NC's Certificates of Participation (Series 2003F; 2005A; 2008A, 2013B,C,G; 2015B; 2015 TIFIA) to Aa1 from Aa2. The Aa1 rating is one notch lower than Moody's Aaa general obligation rating. The notching reflects a standard legal structure for a North Carolina lease financing and a leased asset, that we view as "more essential." The Series 2008A, 2013B, 2013C, 2015B and 2015 TIFIA COPs are related the city's transit system and benefit from a dedicated revenue stream. The notching also reflects the strong legal features of North Carolina general obligation and lease revenue debt.

Concurrently, Moody's affirms the Aa2 rating on $607 million of less essential outstanding COPs and the Aa1 on the outstanding $180.2 million more essential COPs.

The outlook remains stable.

The Aa1 rating on specific COPs is based on the more essential nature of the pledged assets and in the case of transit COPs, the voter approved sales tax that provides over five times debt service coverage. The Series 2003F and Series 2013G Governmental Facilities Projects COPs financing the arena have a collateral package that includes a first lien on City Hall, Law Enforcement Center and fire department facilities. The Series 2005A Central Yard Project COPS have a collateral package that includes a first lien on public works, vehicle maintenance and solid waste facilities pledged.

The transit related COPs benefit from a dedicated sales tax revenue that is not legally pledged, but earmarked for payment of debt service. There was a challenge to the transit sales tax in 2007, when recall of the revenue stream was put forth for voter re-approval. The sales tax was strongly endorsed with voters approving the tax in stronger numbers (70% in favor versus the original 58%) than had in the original vote in 1998. There is no sunset on 1/2 cent transit sales tax. The city has a policy of maintaining three times debt service coverage and maintaining a minimum $100 million Transit reserve fund balance. Debt service coverage has remained strong at 5.3 times and 5.5 times in fiscal 2015 and 2016 (unaudited), respectively.

This action concludes a review undertaken in conjunction with the publication on July 26, 2016 of the Lease, Appropriation, Moral Obligation, and Comparable Debt of US State and Local Governments Methodology.

Rating Outlook

The stable outlook on the COPs reflects the stable outlook on the city's general obligation debt.

Factors that Could Lead to an Upgrade

- Not applicable

Factors that Could Lead to a Downgrade

- Deterioration in the general credit profile of the issuer

Legal Security

The Certificates of Participation (COPs) are secured by the city's annual appropriation pledge and a first lien on pledged assets.

Methodology

The principal methodology used in this 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 this methodology.

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For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Edward Damutz
Lead Analyst
Regional PFG Northeast
Moody's Investors Service, Inc.
100 N Riverside Plaza
Suite 2220
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US
JOURNALISTS: 212-553-0376
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Tiphany Lee-Allen
Additional Contact
Regional PFG Northeast
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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