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Rating Action:

Moody's assigns Aa1 to Goodyear, AZ's GO Refunding Bonds, Series 2020; affirms Aa1 outstanding GOULT bonds; upgrades outstanding excise tax bonds to Aa2; outlook stable

21 Feb 2020

New York, February 21, 2020 -- Moody's Investors Service has assigned a Aa1 rating to the City of Goodyear, AZ's $9.6 million General Obligation Refunding Bonds, Series 2020. Concurrently, we affirmed the city's outstanding GO Unlimited Tax (GOULT) bonds at Aa1, affecting approximately $103.2 million of debt outstanding. Additionally, we upgraded the Goodyear Public Improvement Corporation's outstanding municipal facilities revenue refunding bonds to Aa2 from Aa3, affecting approximately $82.1 million in debt outstanding. A stable outlook has been assigned to the municipal facilities revenue refunding bonds. The outlook for the GOULT bonds is stable.

RATINGS RATIONALE

The assignment and affirmation of the Aa1 GOULT ratings reflect the city's rapidly expanding local economy and continued tax base growth in the greater Phoenix metro area, ample financial reserves and a sophisticated management team producing operating surplus and long-term structural balance. The ratings further reflect the average socioeconomic profile for the rating level, prudent fiscal policies driving robust reserve and liquidity levels though mitigated by the city's high reliance on economically sensitive sales tax and state-shared revenue. Finally, the ratings incorporate the high overall debt burden for the rating level, average fixed costs and moderate pension burden.

The upgrade to Aa2 on the municipal facilities revenue refunding bonds (excise tax revenue bonds) reflects the city's overall economic growth driving sales tax revenue and activities. The excise tax revenue bonds are secured by pledged excise tax revenues that has demonstrated solid growth though mitigated by the volatile and cyclical nature of revenues. Despite the ramp up of debt service payments in 2019 with maximum debt service in 2020, coverage remains strong. The rating further reflects projected reimbursements from the Arizona Sports and Tourism Authority (A1 stable) over the next 10 years beginning in 2020, which would help subsidize debt service payments through maturity in fiscal 2032. The rating further incorporates adequate legal provisions of the bonds.

RATING OUTLOOK

The stable outlook reflects our expectation for continued healthy local economic growth as well as the maintenance of high reserves that help mitigate the city's exposure to economically sensitive sales taxes and state-shared revenues.

FACTORS THAT COULD LEAD TO AN UPGRADE

- Substantial improvement in the city's socioeconomic profile (GOULT)

- Reduction in overall leverage including debt and pension metrics (GOULT)

- Reduction on dependence on economically sensitive sales tax revenues (GOULT)

- Sustained growth of pledged revenues improving debt service coverage (Excise)

- Improvement in city socioeconomic measures (Excise)

FACTORS THAT COULD LEAD TO A DOWNGRADE

- Prolonged deterioration in tax base values and weakening local economy (GOULT)

- Substantial decline in general fund reserves and liquidity below that of national peers (GOULT)

- Substantial growth in overall leverage profile, including debt and pension liabilities leading to growing fixed costs (GOULT)

- Downgrade of the city's GOULT rating (Excise)

- Substantial decline and negative fluctuations in pledged revenues (Excise)

- Weakening debt service coverage due to declining economic performance (Excise)

LEGAL SECURITY

GOULT bonds are secured by the city's pledge to levy ad valorem taxes on all taxable property without limit on rate or amount under its secondary property tax rate. Revenues collected from the levy for GOULT debt service are held separately from all other revenues and can only be used to pay principal and interest on GOULT debt and related expenses. Other than proceeds from this levy, no other revenues or funds are legally pledged to repay bonds. State legislation conveys a statutory lien on the debt service levy for GOULT bonds, a credit strength for bondholders.

The excise tax revenue bonds are secured by a first lien on the city's transaction privilege (sales) taxes, state-shared sales taxes, state revenue sharing, franchise taxes, permits, fees, fines and forfeitures. Legal provisions are adequate and includes an additional bonds test of 2.0x MADs, an open flow of funds, no debt service reserve, a credit weakness though mitigated by strong debt service coverage.

USE OF PROCEEDS

Proceeds of the Series 2020 GOULT refunding bonds will be used to refund outstanding Taxable General Obligation Bonds Series 2010 (Build America Bonds-Direct Pay) and General Obligation Refunding Bonds, Series 2010.

PROFILE

Goodyear is a rapidly expanding, medium-size, 190 square mile full-service city, 17 miles west of downtown of the City of Phoenix, AZ (Aa1 negative). The city operates under a charter and is governed by a mayor and six city councilmembers, who appoint a City Manager responsible for overall operations and supervision of all governmental functions. Estimated population as of 2019 is 88,870. The city employs approximately 644 FTE as of fiscal 2019, including self-supporting enterprises.

METHODOLOGY

The principal methodology used in the general obligation ratings was US Local Government General Obligation Debt published in September 2019. The principal methodology used in the special tax ratings was US Public Finance Special Tax Methodology published in July 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

Vivian Lee
Lead Analyst
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Moody's Investors Service, Inc.
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

William Oh
Additional Contact
Regional PFG West
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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