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Rating Action:

Moody's assigns initial Aa3 underlying and Aa2 enhanced to Perry Township MSD, IN's GO

05 Apr 2019

New York, April 05, 2019 -- Moody's Investors Service has assigned an initial Aa3 underlying and Aa2 enhanced ratings to Perry Township Metropolitan School District, IN's $5 million General Obligation Bonds, Series 2019A and $2 million General Obligation Bonds, Series 2019B. Moody's has also assigned a Aa3 issuer rating to the district. The issuer rating is equivalent to the General Obligation Unlimited Tax (GOULT) rating we would assign to GOULT debt of the district. Following the sale, the district will have $127 million of ad valorem property tax supported debt outstanding.

RATINGS RATIONALE

The Aa3 issuer rating reflects the district's large tax base within Indianapolis-Marion County (Aaa stable), relatively weak resident income levels, healthy financial operations supported by strong reserves and voter support for operating referenda, an above average debt burden, and a modest pension burden. The rating also reflects certain challenges in the district's history of financial reporting, namely that the audited financial results are issued biennially and, while currently up-to-date, have been substantially delayed in recent years. While this is not uncommon among Indiana local governments, we expect that timely audited financial statements will be made available going forward.

The lack of distinction between the issuer rating and the rating on the Series 2019A and Series 2019B bonds reflects the district's general obligation pledge to pay debt service on the bonds.

The Aa2 enhanced rating reflects the additional security provided by the State of Indiana's School District Intercept Program. The programmatic rating is notched twice from the State of Indiana's Aaa stable GO rating and reflects the state's statutory commitment to ensure the sufficiency and timeliness of funds to meet debt service payments, strong state oversight of school districts, and a commitment to intercept the district's annual state aid for debt service upon notification of any missed debt service payment. State aid to Perry Township MSD in fiscal 2019 provides over 5x coverage on maximum annual debt service. The enhancement program carries the State of Indiana's stable outlook.

RATING OUTLOOK

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

FACTORS THAT COULD LEAD TO AN UPGRADE

- Substantial expansion of the tax base and strengthening of resident income levels

- Growth in operating cash position

- Moderation of debt burden

FACTORS THAT COULD LEAD TO A DOWNGRADE

- Contraction in local tax base

- Significant draws on the operating cash position

- Increased leverage

PROFILE

Perry Township MSD provides early childhood and K-12 education to approximately 16,300 students. The district covers roughly 46 square miles in the southern portion of Indianapolis-Marion County and serves a population of nearly 99,000.

USE OF PROCEEDS

Proceeds of the Series 2019A bonds will fund various projects in the district's ten-year facility maintenance plan, including replacement of flooring, HVAC systems, pavement, and roofing. Proceeds of the 2019B bonds will primarily fund the purchase and installation of technology equipment.

LEGAL SECURITY

The Series 2019A and Series 2019B bonds are general obligations of the district, payable from ad valorem property taxes. The levy for the bonds is subject to the State of Indiana's Circuit Breaker, though state statute requires the district to fund its debt service obligations regardless of any property tax revenue shortfall. The bonds further benefit from the State of Indiana's School District Intercept Program.

METHODOLOGY

The principal methodology used in the underlying ratings was US Local Government General Obligation Debt published in December 2016. The principal methodology used in the enhanced rating was State Aid Intercept Programs and Financings published in December 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.

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.

Ryan Patton
Lead Analyst
Regional PFG Chicago
Moody's Investors Service, Inc.
100 N Riverside Plaza
Suite 2220
Chicago 60606
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Tatiana Killen
Additional Contact
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

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