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Rating Action:

Moody's assigns Aa3 rating to Chambersburg Area School District's (PA) General Obligation Bonds, Series of 2018

15 Oct 2018

New York, October 15, 2018 -- Moody's Investors Service has assigned a Aa3 to Chambersburg Area School District, PA's $22.67 million General Obligation Bonds, Series of 2018. Moody's maintains a Aa3 rating on the district, affecting $125.82 million in parity debt outstanding.

Additionally, Moody's maintains the district's A3 enhanced (non-fiscal agent) rating, covering the district's Series of 2014AA, 2015A, 2015AA, and 2016 general obligation debt.

RATINGS RATIONALE

The district's Aa3 general obligation rating reflects its satisfactory and stabilized financial position; sizeable and stable tax base, and slightly above average debt burden.

We consider the district's Series of 2018 and other limited tax debt to be GOLT because of limitations under Commonwealth of Pennsylvania law (Pennsylvania Act 1, "Taxpayer Relief Act") which limit the amount that school districts can increase property taxes. The lack of distinction between the GOLT rating and the GOULT rating reflects school districts' ability apply for exemptions to the cap on property tax increases in order to cover debt service and the district's full faith and credit pledge supporting all general obligation debt.

The A3 enhanced rating reflects our current assessment of the Pennsylvania School District Intercept Program, which provides that state aid will be allocated to bondholders in the event that the school district cannot meet its scheduled debt service payments. The A3 enhanced rating reflects that Chambersburg Area School District has not engaged a paying agent, and there is no language in the bond documents that will trigger the state aid intercept prior to default. As of audited 2017 financial statements, Chambersburg Area School District's state aid revenue provides more than sum sufficient debt service coverage.

RATING OUTLOOK

Outlooks are not typically assigned to local government credits with this amount of debt outstanding.

The enhanced rating carries an outlook of stable, which mirrors the outlook of the Commonwealth of Pennsylvania (Aa3 stable).

FACTORS THAT COULD LEAD TO AN UPGRADE

- Continued growth in reserves and liquidity in the near term

- Material reduction in the debt burden

- Growth in wealth levels

- Upgrade of the rating for the Commonwealth (enhanced)

FACTORS THAT COULD LEAD TO A DOWNGRADE

- Structurally imbalanced operations leading to material declines in reserves and liquidity

- Additional borrowing leading to further growth in the debt burden and debt service

- Deterioration of tax base and existing wealth

- Downgrade of the rating for the Commonwealth (enhanced)

LEGAL SECURITY

The Series of 2018 debt, along with the majority of the district's debt, is secured by its general obligation limited tax (GOLT) pledge, which is subject to the limits of Pennsylvania's Act 1 "Taxpayer Relief Act." The Series of 2012 and Series of 2014 bonds are secured by district's general obligation unlimited tax pledge, as they were issued to refund debt that was originally issued prior to the 2006 implementation of the Act 1 index.

The district's debt is further enhanced by the Pennsylvania School District Intercept Program. The intercept program is not a general obligation guarantee of the Commonwealth, and in fact, there have been times when the state has not distributed any aid to school districts, as was the case during the 2016 state budget impasse. However, with implementation of Act 85 in 2016, the state has ensured that intercept payments, for the benefit of bond debt service, will be made even in the absence of an appropriation budget.

USE OF PROCEEDS

Proceeds from the sale of the Series of 2018 bonds will be used to refund the district's Series of 2009 and Series of 2011 bonds for a savings of $1.2 million for the school district.

PROFILE

Chambersburg Area School District, Pennsylvania, serves approximately 9,300 students in rural Franklin County through 13 elementary, two middle schools, one high school, one career magnet school, and a district operated cyber program. The district is approximately 50 miles southwest of the Harrisburg.

METHODOLOGY

The principal methodology used in this rating was US Local Government General Obligation Debt published in December 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

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.

Gregory Sobel
Lead Analyst
Regional PFG Northeast
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Leonard Jones
MANAGING DIRECTOR
Regional PFG Northeast
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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