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06 Dec 2018
New York, December 06, 2018 -- Moody's Investors Service has downgraded Platte County, MO's Issuer rating to Ba3 from Ba1, the rating on the county's Neighborhood Improvement District bonds (NID Bonds; Series 2008A, 2010, 2011, 2013, and 2016) to B2 from Ba1, and lease appropriation rating on the Special Obligation Refunding and Improvement Building Bonds (Series 2011A) to Caa1 from B1. The outlook remains negative.
The downgrade of the Issuer rating to Ba3 reflects the county's failure to transfer funds appropriated to fulfill what Moody's believes to be a contractual obligation, subject to annual appropriation by the county, to make payments sufficient to pay principal and interest on the Industrial Development Authority of the County of Platte County, Missouri Transportation Refunding and Improvement Revenue Bonds (Zona Rosa Retail Project), Series 2007 (unrated) and the resulting bond default. The county is also challenging the legality of its obligation by filing a Petition for Declaratory Relief to clarify if the county's obligation is fulfilled by simply appropriating for the Zona Rosa bonds or if said appropriation also obligates the county to actually provide for revenue shortfalls on the Zona Rosa bonds. The county's lack of willingness to pay an obligation in the capital markets calls into question its willingness to pay other obligations. There has been no change in the underlying credit characteristics which, absent the county's current position regarding the IDA bonds, would correspond to a much higher rating.
The downgrade of the county's Neighborhood Improvement District bond ratings (Series 2008A, 2010, 2011, 2013, and 2016) to B2 and the two notch distinction from the Issuer rating reflects the more narrow pledge of the bonds. The debt is secured by special assessments levied upon the property benefiting from the improvement, and, if not so paid, from the current income and revenues and surplus funds of the county. However, the county is prohibited from imposing or increasing ad valorem property taxes to satisfy debt service requirements without voter approval as required by the constitution and laws of the State of Missouri; voter approval has not been sought, nor does the county expect to obtain voter approval. While the county made a full faith and credit pledge, there are the structural similarities between the NID bonds, the IDA bonds, and the argument made in the county's Petition for Declaratory Relief filed in November 2018. As such, the risk that the county would not actually utilize current income and revenues and surplus funds to satisfy debt service on the NID bonds should the special assessments prove insufficient is elevated given the county's current position regarding the IDA bonds.
The downgrade of the county's lease appropriation rating on the Special Obligation Refunding and Improvement Building Bonds (Series 2011A) to Caa1 reflects the standard two notch distinction from the county's Issuer Rating given appropriation risk and the less essential nature of the project (community centers) and an additional two-notch distinction reflecting the county's lack of willingness to fulfill a contractual obligation on another appropriation lease obligation.
The negative outlook reflects the uncertainty surrounding future payments and the disposition of litigation filed to absolve the county of its obligation to appropriate and transfer certain moneys to the trustee for application to the payment of the bonds.
FACTORS THAT COULD LEAD TO AN UPGRADE
- County's explicit pledge and trend of fulfilling obligations
FACTORS THAT COULD LEAD TO A DOWNGRADE
- Failure to appropriate and pay debt service on other obligations beyond the Zona Rosa debt
- Decline in fundamental ability to pay
The Issuer rating satisfies our methodological requirement to utilize an implicit (GOULT) rating as the starting point for our analysis of GOLT and Lease Appropriation debt. The NID debt is payable as to both principal and interest from special assessments against real property benefited by the acquisition and construction of improvements paid for from the proceeds of the Bonds within a certain neighborhood improvement district in Platte County, Missouri, and, if not so paid, from current income and revenues and surplus funds of the county. The full faith and credit of the county are irrevocably pledged for payment of principal of and interest on the debt; however, the county may not impose any new or increased ad valorem property tax to pay principal of or interest on the Bonds without the voter approval required by the constitution and laws of the State of Missouri. No such voter approval has been sought or obtained.
The Special Obligation Refunding and Improvement Building Bonds (Series 2011A) lease appropriation debt is payable solely from amount pledged or appropriated by the county each fiscal year. The county did not pledge its full faith and credit and is not obligated to levy taxes or resort to any other monies of the county to pay the principal and interest on the debt.
The Industrial Development Authority (Zona Rosa Retail Project), Series 2007 bonds are not rated by Moody's and are payable solely from pledged revenues. The authority, Platte County South Transportation Development Districts I and II, and Platte County entered into a financing agreement whereby the county agreed, subject to annual appropriation, to transfer funds to the Trustee in an amount sufficient for the payment of the bonds.
The county is located on the western border of Missouri (Aaa stable) and is one of thirteen counties in the Kansas City, Missouri-Kansas metropolitan area. The Missouri River is on the county's western and southern borders. The county comprises 421 square miles and as of 2016, the estimated population of was 94,970.
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 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.
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