Rating Action: Moody's assigns Aa3 to Moreland SD, CA's GOULT Bonds, Series A and A-1Global Credit Research - 09 Mar 2021New York, March 09, 2021 -- Moody's Investors Service has assigned Aa3 ratings to Moreland School District, CA's Election of 2020 General Obligation Bonds, Series A (Tax-Exempt) and Election of 2020 General Obligation Bonds, Series A-1 (Federally Taxable). The bonds will be issued in the expected par amounts of $28 million and $6 million, respectively. Moody's has also affirmed the Aa3 ratings on the district's close to $93.6 million in outstanding general obligation unlimited tax (GOULT or GO) bonds as well as the district's A1 issuer rating. The issuer rating reflects the district's ability to repay debt and debt-like obligations without consideration of any pledge, security, or structural features.RATINGS RATIONALEThe A1 issuer rating reflects the district's robust and expanding economy with strong income levels enhanced by its location in California's Silicon Valley outside of San Francisco. The rating also incorporates the district's satisfactory financial position that will remain stable, with a restoration of balanced operations supported by additional parcel tax revenue, annual lease payments from tenants utilizing unused sites, and additional cuts to staffing levels commensurate with declines in enrollment. The district's elevated leverage, inclusive of debt, pension and OPEB obligations, is also factored into the rating, with fixed costs that will remain elevated but manageable.The Aa3 rating on the school district's GOULT bonds is one notch higher than the district's issuer rating. The one-notch distinction reflects California school district GO bond security features that include the physical separation through a "lockbox" for pledged property tax collections and a security interest created by statute.RATING OUTLOOKOutlooks are usually not assigned to local government credits with this amount of debt outstanding.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS-Substantial and sustained increase in reserve levels-Significant decrease in leverageFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS-Deterioration in the district's financial position-Ongoing enrollment declines that pressure financial performance-Economic weakness that would erode revenue from leased sitesLEGAL SECURITYThe district's general obligation bonds are secured by an unlimited property tax pledge of all taxable property within the district boundaries. Debt service on the rated debt is secured by the district's voter-approved unlimited property tax pledge. Santa Clara County (Aa1 stable) rather than the district will levy, collect, and disburse the district's property taxes, including the portion constitutionally restricted to pay debt service on general obligation bonds.USE OF PROCEEDSThe Election of 2020 GO Bonds, Series A and A-1 represent the first issuances of an $80 million GO authorization approved by voters in 2020. The Series A bonds will finance the first phase of various capital projects throughout the district including improvements to security, roofing and HVAC systems. The taxable Series A-1 bonds will finance technology purchases that comprise part of a 10-year plan. Following the current issuances, the district will retain $46 million in GO authorization that it expects to issue in two subsequent sales over the next two to three years.PROFILELocated in Santa Clara County, Moreland School District provides educational services through 8th grade to the residents of the western portion of San Jose (Aa1 stable) and portions of the cities of Campbell and Saratoga. The district is governed by a five-member Board and serves 4,313 students as of fiscal 2021 in seven schools.METHODOLOGYThe principal methodology used in these ratings was US K-12 Public School Districts Methodology published in January 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1202421. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor 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_1243406.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. 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