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Rating Action:

Moody's assigns Aa3 to City of Waverly, IA's GOs, A1 to water revenue bonds

14 Jun 2018

New York, June 14, 2018 -- Moody's Investors Service has assigned a Aa3 general obligation unlimited tax (GOULT) rating to the City of Waverly, IA's $11.0 million General Obligation Bonds, Series 2018A and an A1 revenue rating to the City of Waverly Water Enterprise's (IA) $1.7 million Water Revenue Bonds, Series 2018B. We affirm the Aa3 rating on the city's outstanding GOULT and maintain the A1 rating on the outstanding water revenue bonds. Following the current sales, the city will have $28.9 million of GOULT debt and $2.9 million of water revenue debt.

RATINGS RATIONALE

The Aa3 GOULT rating reflects the city's modestly sized, but growing tax base; sound financial position supported by prudent fiscal management and adequate revenue raising flexibility; and above average debt and pension burdens. The rating also considers the contingent liability risk associated with the ownership of a hospital.

The A1 water revenue rating reflects the water enterprise's relatively small system size, sound financial operations supported by unlimited rate setting authority and a demonstrated history of phasing in rate increases to maintain sable debt service coverage, and very healthy liquidity. The rating also considers adequate legal provisions which include a 1.25x rate covenant and debt service reserve requirement.

RATING OUTLOOK

Outlooks are not typically assigned to local governments with this amount of debt.

FACTORS THAT COULD LEAD TO AN UPGRADE

Moderation of debt and pension burdens (GOULT rating)

Considerable expansion of the tax base (GOULT rating)

Significant expansion of the service area (water revenue rating)

Sustained improvement in annual debt service coverage (water revenue rating)

FACTORS THAT COULD LEAD TO A DOWNGRADE

Further increases to debt or pension burden (GOULT rating)

Heightened risk related to city owned hospital enterprise (GOULT rating)

Material reduction in reserves (GOULT and water revenue ratings)

Declines in annual debt service coverage due to additional borrowing or a reduction in net revenues (water revenue rating)

LEGAL SECURITY

Debt service on the city's GO debt is secured by a dedicated property tax unlimited as to rate or amount.

Debt service on the water revenue debt is secured by a senior lien on net revenues of the water enterprise.

USE OF PROCEEDS

Proceeds of the Series 2018A bonds will finance the cost of various capital improvements and the acquisition of real estate associated with the improvements.

Proceeds of the Series 2018B bonds will finance the costs of acquisition, construction, reconstruction, extension, and improvement of a portion of the water utility's water mains.

PROFILE

The City of Waverly is located in Bremer County (Aa3) approximately 15 miles north of the Cedar Falls-Waterloo metro area. The city provides basic municipal services, including public safety, recreation, and public works, to approximately 10,000 residents. The city owns several business type enterprises including a water, sewer, solid waste, and electric utilities, as well as a municipal hospital.

The water utility is an enterprise of the City of Waverly, including all areas within the city limits excluding areas currently zoned as agricultural. As of 2017, the water utility served 4,059 metered customers.

METHODOLOGY

The principal methodology used in the general obligation ratings was US Local Government General Obligation Debt published in December 2016. The principal methodology used in the revenue rating was US Municipal Utility Revenue Debt published in October 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 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.

The person who approved the general obliation credit ratings is David Levett, VP-Senior Analyst, Public Finance Group, 1 212 553 0376, 1 212 553 1653. The person who approved the revenue credit ratings is Alexandra Parker, MD-Public Finance, Public Finance Group, 1 212 553 0376, 1 212 553 1653.

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.

Francis Mamo
Lead Analyst
Regional PFG Chicago
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

David Levett
Additional Contact
Regional PFG Chicago
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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