Rating Action: Moody's assigns Aa1 to Alpine School District, UT's Lease Revenue Bonds, Series 2020; outlook stable
New York, August 11, 2020 -- Moody's Investors Service has assigned a Aa1 to Alpine School District's Lease Revenue Bonds, Series 2020 in the expected amount of $29.2 million. Concurrently, Moody's affirms the Aaa ratings on the district's outstanding general obligation unlimited tax (GOULT) totaling $565.6 million and the Aa1 rating on the district's outstanding lease revenue bonds totaling $30.8 million. The outlook remains stable.
The Aaa GOULT rating reflects the district's large tax base that continues to grow at a rapid pace and a local economy that demonstrated solid employment expansion as well as satisfactory and improving wealth measures. The rating also considers the district's trend of strong and structurally balanced financial operations, strong reserve levels, and manageable debt, pension and OPEB liabilities.
The Aa1 rating for the district's lease revenue bonds is one notch lower than the district's Aaa GO rating and reflects a standard legal structure that includes a pledge of base rental payments subject to annual appropriation and no debt service reserve fund. The Aa1 lease revenue rating reflects the leased asset which we view as "more essential."
We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The coronavirus crisis is not a key driver for this rating action. We do not see any material immediate credit risks for Alpine School District due to the stable funding environment in the state and the expectation that the district will continue to see enrollment growth. However, the situation surrounding Coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of Alpine School District, UT changes, we will update the rating and/or outlook at that time.
The stable outlook reflects our expectation that the district's tax base will return to growth after the coronavirus slowdown and that the district will prudently manage its capital needs to accommodate rapid enrollment growth. The district's solid level of financial flexibility combined with a conservative and proactive leadership team positions it well to prudently balance growth and stable financial performance.
- Not applicable
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- Protracted decline in the district's full valuation
- Deterioration in the district's financial position
- Significant increase in debt and/or pension liabilities
LEGAL SECURITY
The lease revenue bonds are secured by a pledge by the district to make base rental payments sufficient to pay principal and interest, subject to annual appropriation. The lease is governed by a master lease agreement between the Local Building Authority of Alpine School District as lessor, the Board of Education of the Alpine School District as lessee, and the trustee.
The district's outstanding GOULT debt is secured by the district's unlimited property tax pledge.
USE OF PROCEEDS
Proceeds from the bonds will be used to fund the construction of two new elementary schools.
PROFILE
The district, created in 1915, covers the northern half (approximately 724 square miles) of Utah County. Its boundaries run from the Salt Lake County (Aaa stable) line on the north to the Provo City School District (Aa2 stable) and Nebo School District (Aa2) boundaries on the south and from Tooele County (Aa3) on the west to Wasatch County on the east. Its headquarters are located in the city of American Fork (Aa3), which is approximately 30 miles south of Salt Lake City (Aaa stable).
The district operates 92 schools with 61 elementary schools, 13 junior high schools, 10 traditional high schools and 8 special purpose facilities. With a student population of 81,532 ss of October 1, 2019, the district ranks as the largest school district among the State's 41 school districts by enrollment.
METHODOLOGY
The principal methodology used in the general obligation ratings was US Local Government General Obligation Debt published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1230443. The principal methodology used in the lease ratings was Lease, Appropriation, Moral Obligation and Comparable Debt of US State and Local Governments published in July 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1102364. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website 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.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
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.
Steven Goodman-Leibof Lead Analyst Regional PFG West Moody's Investors Service, Inc. One Front Street Suite 1900 San Francisco 94111 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 William Oh Additional Contact Regional PFG West 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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