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Rating Action:

Moody's assigns Aaa to Georgia's 2019 general obligation bonds, affirms related ratings; outlook stable

10 Jun 2019

New York, June 10, 2019 -- Moody's Investors Service has assigned a Aaa rating to the State of Georgia's $636.3 million General Obligation Bonds 2019A, $278.6 million General Obligation Bonds 2019B (Federally Taxable) and $36.1 million General Obligation Refunding Bonds 2019C. The bonds are expected to price on or about June 19, 2019. Concurrently, Moody's affirmed the Aaa rating on all outstanding general obligation and guaranteed revenue bonds, the Aa1 program rating on the Georgia School District Intercept Program and the Aa2 rating on the Revenue Refunding Bonds (TUFF Archives LLC-Secretary of State of Georgia Project), Series 2012. The outlook remains stable.

RATINGS RATIONALE

The Aaa general obligation rating reflects Georgia's relatively low debt and pension obligations and robust fiscal management and governance. A rapidly growing and strong economy mitigates below-average resident income and vulnerabilities that manifested in past recessions, such as a large decline in economically sensitive revenue.

The Aaa rating on the guaranteed revenue bonds is based on the general obligation rating of the state, which has pledged its full faith and credit to assure repayment of the bonds. The bonds are proximately secured by a claim on a portion of the state's 27.5 cents per gallon motor fuel taxes. The state expects the tax to be sufficient to cover debt service on the bonds.

Georgia's School District Intercept Program is rated Aa1, one notch below the state, owing to strong commitment and essentiality of the program and strong program mechanics, which are deemed effective, reliable and timely, although the state has never had to act on behalf of a school district. The program supports the highly essential school district sector and is authorized in the Official Code of Georgia Annotated.

The Aa2 rating on the Revenue Refunding Bonds (TUFF Archives LLC-Secretary of State of Georgia Project), Series 2012 reflects the general credit strength of the state, a moderate legal structure consisting of a limited subject-to-appropriation nature of the payment obligation, and the more essential nature of financed facility. The two-notch rating distinction also acknowledges the involvement of TUFF Archives LLC, a 501(c)3 entity serving as the lessor.

RATING OUTLOOK

The stable outlook recognizes that Georgia has likely built up reserves sufficient to preserve its credit quality at a high level even if the economy were to enter a recession.

FACTORS THAT COULD LEAD TO AN UPGRADE

- Not applicable

FACTORS THAT COULD LEAD TO A DOWNGRADE

- A materially diminished financial position

- Growth in long-term liabilities and fixed costs that outpace expansion of the state's economy and revenue base

- A departure from strong fiscal management and governance practices

LEGAL SECURITY

The 2019 bonds are general obligations of the state. According to the state's constitution, general obligation bonds are secured by the "full faith, credit, and taxing power of the state." The constitution requires that if the funds in the debt service fund are insufficient to pay debt service, the "first revenues" of the general fund must be set aside to cure the deficiency.

The guaranteed revenue bonds are proximately secured by a claim on a portion of the state's 27.5 cents per gallon motor fuel taxes. Additionally, by resolution and legislation, the State of Georgia has pledged its full faith and credit to guarantee debt service on the bonds.

The School District Intercept Program is authorized in the Official Code of Georgia Annotated Sections 20-2-170 and 20-2-480, and requires the State Board of Education (BOE) to intercept funds payable to an issuer if the paying agent, custodian or trustee notifies the BOE of the event of a debt service shortfall.

The Revenue Refunding Bonds (TUFF Archives LLC-Secretary of State of Georgia Project), Series 2012 are payable solely from payments expected to be made by the state under an annually renewable rental agreement between the Development Authority of Clayton County and the state. Such payments are made from appropriations to the project, which are subject to legislative appropriation in each fiscal period, but are otherwise unconditional.

USE OF PROCEEDS

Proceeds of the 2019A, 2019B and 2019C general obligation bonds will finance various capital projects, including higher education, K-12 education and election voting systems, as well as to refund certain outstanding general obligation bonds.

PROFILE

Georgia is the eighth largest state, with a population of 10.5 million. Its gross domestic product ranks ninth among states.

METHODOLOGY

The principal methodology used in the general obligation and guaranteed revenue ratings was US States and Territories published in April 2018. The principal methodology used in the program rating was State Aid Intercept Programs and Financings published in December 2017. The principal methodology used in the lease rating was Lease, Appropriation, Moral Obligation and Comparable Debt of US State and Local Governments published in July 2018. 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.

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.

Joshua Grundleger
Lead Analyst
State Ratings
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

Matthew Butler
Additional Contact
State Ratings
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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