Rating Action: Moody's assigns Aa2 underlying, Aaa enhanced to Washington County SD, UT's 2021A GOULT bonds
Global Credit Research - 17 Dec 2020
New York, December 17, 2020 -- Moody's Investors Service has assigned a Aa2 underlying rating to Washington County School District, Utah's $5.7 million General Obligation Refunding Bonds (Utah School District Bond Guaranty Program), Series 2021A. We have also assigned a Aaa enhanced rating to the bonds based on their participation in the Utah School District Bond Guaranty Program (Aaa stable). We maintain Aa2 ratings on the district's outstanding debt of about $297 million, post-issuance. The outlook is stable.
RATINGS RATIONALE
The Aa2 underlying rating reflects the district's large and growing tax base with above-average wealth and below-average income. Reserves continue to improve, though they remain somewhat below national peers. Enrollment growth continues to be strong despite the coronavirus pandemic, driving increased state funding and a robust future capital plan. Favorably, the district continues to budget conservatively for enrollment and planned for increased costs in the current year to provide safe, multi-modal instruction. Pension and debt liabilities are manageable, with rapid payout allowing for future debt issuance to meet capital needs. Despite rapid amortization, fixed costs are only somewhat above average, with debt service as the primary contributor.
The Aaa enhanced rating is based on the additional security provided to bondholders by the Utah School District Bond Guaranty Program. Under this program, the state's full faith and credit guarantees debt service payments by transfer of the state's general funds to the paying agent in the event of a shortfall for the district.
RATING OUTLOOK
The stable outlook on the underlying rating reflects our expectation that the local economy will remain solid and the well-managed but below-average reserve levels will be maintained due to ongoing revenue growth and robust expense management. Debt and pension liabilities will be largely stable given rapid payout for debt and contributions that exceed levels needed to maintain net liabilities under plan assumptions.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
- Material improvement in resident income - underlying rating
- Significant and sustained improvement in fund balance that compares to peers - underlying rating
- Not applicable - enhanced rating
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- Decline in the district's reserve levels below historical averages - underlying rating
- Substantial and protracted decline in the district's tax base - underlying rating
- Downgrade of the Utah School District Bond Guaranty Program - enhanced rating
LEGAL SECURITY
The bonds are secured by the district's unlimited property tax pledge.
The Utah School District Bond Guaranty Program pledges the state's full faith and credit to make whole any shortfall in debt service by the district, if necessary, on a timely basis for payment to bondholders.
USE OF PROCEEDS
Proceeds will be used to refund certain maturities of the district's Series 2011 bonds.
PROFILE
The 2,427 square-mile district is in southern Utah (Aaa stable) coterminous with Washington County (Aa2). Resident population is 160,537 (2018 U.S. Census estimate) and the district serves 33,883 students (as of fiscal 2020). The district operates 51 schools, including 28 elementary schools, 12 middle schools and 11 high schools, which includes online elementary and high schools.
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_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. 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.
Samuel Feldman-Crough 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 Adebola Kushimo 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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