Rating Action: Moody's assigns Aa2 to Corvallis School District 509J (Benton & Linn Counties), OR's GO Bonds Series 2020
New York, December 02, 2020 -- Moody's Investors Service has assigned a Aa2 rating to Benton & Linn Counties School District 509J (Corvallis), Oregon's General Obligation Bonds, Series 2020 in the expected par amount of $39.92 million. We have also assigned a Aa1 enhanced rating based on the assumption that the bonds will qualify and be backed by the Oregon School Bond Guaranty Program. Moody's maintains Aa2 ratings on the district's outstanding rated general obligation unlimited tax (GOULT) bonds in the amount of $159.5 million.
The Aa2 GOULT rating reflects a large and growing tax base anchored by the institutional presence of Oregon State University as well as solid resident socioeconomic measures. The rating also considers the district's financial performance, which is considered satisfactory despite tax base compression which led to lower than expected local option revenue in fiscal 2020. Still, reserves are adequate, however further revenue weakening from a combination of flat enrollment and compression loss are future credit stress. The rating further reflects the manageable overall leverage, including debt, pension and other post-employment benefit (OPEB), though the current debt burden is above average relative to peers. We view the coronavirus pandemic as a social risk considering the impact on health and safety; the district is proceeding with comprehensive distance learning and a transition to a hybrid model in calendar year 2021, based on state guidance. We expect that the district will continue to manage revenue to expenses, supported by one-time CARES funding. We do not expect material long-term financial loss related to the pandemic.
The Aa1 enhanced rating reflects the State of Oregon's (Aa1 stable) full faith, credit and taxing power which is pledged to guarantee qualified school districts' bond debt service when due. Key aspects of the program include third party notification of any unpaid debt service and favorable state oversight.
Outlooks are not typically assigned to local governments with this amount of debt outstanding.
- Continuation of structural imbalance resulting in deterioration of reserves and liquidity
- Protracted tax base declines leading to increased tax base compression and reduced local option revenue
- Material increase in debt and pension liabilities
LEGAL SECURITY
The current offering is secured by the district's full faith, credit, and unlimited property tax pledge. Debt service for GOULT bonds in Oregon is funded by a separate property tax levy that is dedicated to bondholders and secured through statute, a beneficial credit strength for bond holders. The state also pledges its full faith, credit and taxing power under the Oregon School Bond Guaranty Program to guaranteed debt service when due for a school district's qualified GOULT bonds.
USE OF PROCEEDS
Proceeds from the Series 2020 bonds will be used to finance various school facilities improvements and building upgrades.
PROFILE
The district serves the City of Corvallis, the county seat of Benton County (Aa2) in central western Oregon. The district operates two high schools, two middle schools, one K-9 school, seven elementary schools, an alternative education center and sponsors a charter school. District enrollment has declined slightly to 6,745 students in 2020, though it has remained relatively flat over the last five years.
METHODOLOGY
The principal methodology used in the underlying rating 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 enhanced rating was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1068154. 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.
Vivian Lee 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 John Nichols Additional Contact Regional PFG Dallas 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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