Rating Action: Moody's assigns Aa2 to the City of Corinth, TX's Series 2021 GOLT
Global Credit Research - 13 Jan 2021
New York, January 13, 2021 -- Moody's Investors Service has assigned an Aa2 rating to the City of Corinth, TX's $5.3 million Combination Tax and Limited Surplus Revenue Certificates of Obligation, Series 2021. Moody's maintains the Aa2 issuer and General Obligation Limited Tax (GOLT) ratings on the city's outstanding $63.3 million in total debt, post sale, which includes capital lease obligations. The issuer rating is equivalent to the city's hypothetical general obligation unlimited tax rating (GOULT).
RATINGS RATIONALE
The Aa2 issuer rating reflects the city's moderately sized and growing tax base paired with strong resident income indices. The rating also reflects solid operating performance resulting in favorable reserves, slightly high but affordable debt with a moderate pension profile.
The lack of distinction between the city's GOLT rating and the issuer rating reflects sizeable headroom under the limitation allowing ample capacity to service bond holder. The city fiscal 2021 tax rate for the GOLT bonds is $1.39 per $1,000 of assessed values out of a total possible $25 with the attorney general's office not permitting more than $15 to be allocated for debt. Comparing the maximum annual debt service to the allowable maximum levy, the city maintains headroom of over 9 times, not accounting for any self-supporting obligations.
The coronavirus is not a key rating consideration, given the city's high reliance on property taxes and positive sales tax trends. The situation surrounding coronavirus continues to evolve and impact on property values tax base growth will depend on both the severity and duration of the crisis.
RATING OUTLOOK
Moody's generally does not assign outlooks to local governments with this amount of debt outstanding.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING
- Significant tax base growth
- Increases in reserves and liquidity
- Decline in debt burden
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
- Trend of significant tax base decline
- Deterioration of reserves
- Increased debt profile absent corresponding tax base growth
LEGAL SECURITY
The certificates constitute direct obligations of the City, payable from the proceeds of a continuing, direct, annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the city. The certificates are further secured by a limited pledge of $1,000 of a subordinate lien on the net revenues of the city's waterworks and sanitary sewer system.
USE OF PROCEEDS
Proceeds from the sale of the Certificates will be used to for various street construction and improvements and to install and improve various improvements to the city's waterworks and sewer system.
PROFILE
The City of Corinth is largely a bedroom community located in Denton County (Aaa stable) in north central Texas (Aaa stable), approximately 30 miles northwest of downtown Dallas (A1 stable). The 2021 estimated population is 22,265.
METHODOLOGY
The principal methodology used in this rating was US Local Government General Obligation Debt published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1230443. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
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.
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_1243406.
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.
Samantha Krouse Lead Analyst Regional PFG Dallas Moody's Investors Service, Inc. Plaza Of The Americas 600 North Pearl St. Suite 2165 Dallas 75201 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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