Markets were lower on Friday morning, as investors digested the critical unemployment report for February.
The U.S. unemployment rate fell to 5.5%, a six and a half year low last month, as non-farm payrolls came in at 295,000, well above analyst estimates of 240,000. Normally this would incite a market rally, but investors worried that strong jobs numbers may allow the Fed to raise rates earlier than expected. Big news came out of the Dow Jones Industrial Average this week, as it was announced that Apple (AAPL) will be replacing AT&T (T) in the coveted index. This week also saw continued volatility in oil as the commodity struggled to find a meaningful direction.
Below, we look at all of Moody’s municipal bond upgrades and downgrades from the past week.
- Oak Hills Local School District, OH: Moody’s upgraded Oak Hills Local School District from Aa3 to Aa2. The upgrade to the Aa2 rating reflects the district’s strengthening financial reserves following a voter approved property tax increase in November 2013. Also incorporated in the rating is the district’s moderately-sized, suburban Cincinnati (Aa2 negative) tax base with above average resident income levels and stable student enrollment. Additionally factored, is the district’s manageable debt burden; as well as its significantly elevated exposure to unfunded liabilities as a result of its participation in two statewide, cost-sharing pension plans.
- Miami (City of) FL: Moody’s Investors Service has upgraded the rating to A1 from A2 for the City of Miami. The upgrade is based on a resurgent economy with multiple major projects underway, a strengthened financial position, a new management team that has implemented prudent fiscal policies, and a manageable debt profile. The A1 GO rating incorporates Miami’s status as a major trade and transportation hub and tourist destination. The city’s credit is weighed down by weak socioeconomic indices, growing pension pressures, and protracted legal disputes.
- Forney (City of) TX: Moody’s Investors Service has upgraded the North Texas Municipal Water District’s, TX $10.2 million Mustang Creek Wastewater Interceptor System Contract Revenue Bonds, Series 2012 to A1 from A2. The rating upgrade reflects the small yet growing customer base of the water and wastewater utility system of the City of Forney, TX, which exhibits above-average socioeconomics, a high debt service coverage ratio, and strong system liquidity that has been built up over the past three years. The rating also reflects the manageable debt burden of the system and the contract’s strong legal provisions.
- Hannibal (City of) MO: Moody’s Investors Service has upgraded Hannibal Sewer Enterprise, MO’s outstanding revenue debt to A3 from Baa1. The A3 reflects the system’s small and stable customer base in northeast Missouri (Aaa stable); significant customer concentration; sound legal provisions; rate setting flexibility; narrow, though strengthening liquidity levels; and satisfactory coverage ratios.
- Florida Governmental Utility Authority: Moody’s Investors Service has assigned an A2 to the Florida Governmental Utility Authority’s Utility Refunding Revenue Bonds (Golden Gate Utility System), Series 2015. The upgrade to A2 reflects the system’s improved financial metrics and local economy. The rating also incorporates the system’s well-above average debt ratio, which is expected to decline over the medium term due to the absence of future debt plans.
- Texas Tech University System, TX: Moody’s Investors Service upgrades Texas Tech University System’s (TTUS or the system) outstanding revenue financing system (RFS) bonds rating to Aa1 from Aa2. The upgrade to Aa1 is driven by ongoing steady growth of financial resources through fundraising and consistently positive operations, coupled with growing enrollment in line with the system’s strategic plan.
- Irondequoit (Town of) NY: Moody’s Investors Service has upgraded the town of Irondequoit’s (NY) $13.8 million of outstanding general obligation debt to Aa3 from A1. The upgrade to Aa3 reflects the town’s strong operating performance and healthy financial position despite planned reserve draws. The rating also incorporates the town’s large residential tax base, average debt and above average pension burden.
- Big Creek Utility District, TN: Moody’s Investors Service has upgraded to A2 from Baa1 the rating of Big Creek Utility District’s (TN) revenue bonds. The upgrade to A2 reflects the essential nature of the service provided to a small rural customer base in southern Tennessee, the district’s stable customer service area, healthy financial position with strong debt service coverage and ample liquidity, manageable debt profile and satisfactory legal protection for bondholders.
- Onalaska (City of) WI: Moody’s Investors Service has upgraded Onalaska (City of) Water Enterprise, WI’s outstanding revenue debt from Aa3 to Aa2. The Aa2 rating reflects the combined system’s stable service area in the city of La Crosse (Aa2) metro area, satisfactory financial operations supported by healthy net working capital, consistent growth in the customer base, strong legal protections boosted by recent increase in debt reserve fund requirement, and modest debt levels with limited future borrowing plans.
- First Florida Governmental Financing Comm.: Moody’s Investors Service has upgraded the rating to Aa3 from A1 on First Florida Governmental Financing Commission’s $4.4 million Series 2005 bonds. The upgrade to Aa3 related to a change in the composition of pool participants. The weighted average of the pool is now Aa3.
- South Bayside Waste Management Authority, CA: Moody’s Investors Service has upgraded South Bayside Waste Management Authority, CA’s solid waste revenue bonds Series 2009A to A1 from A3. The upgrade to A1 reflects South Bayside Waste Management Authority’s very strong franchise customer base, exceptionally low debt burden, solid rate setting record and very strong rate covenant, and low fixed costs due to its operation as a quasi-public entity with a contract workforce.
- Bessemer (City of) AL: Moody’s Investors Service upgrades to A3 from Baa1 the rating on the City of Bessemer, AL’s $22.6 million Water Revenue Warrants. The upgrade to A3 reflects adequate legal provisions, stable coverage levels, high debt levels and the small but growing nature of the customer base.
- Lumberton Municipal Utility District, TX: Moody’s Investors Service upgraded, to A2 from A3, Lumberton Municipal Utility District, TX’s revenue bonds affecting $9.6 million in debt obligations. The upgrade to A2 from A3 is reflective of the municipal utility district’s history of positive financial performance including currently healthy financial reserves and the presence of an active management team. Further, the rating incorporates the district’s surplus capacity used to support a growing tax base, manageable debt burden, and future capital needs to replenish aging infrastructure.
- Burlington (City of) VT: Moody’s Investors Service has upgraded the City of Burlington’s (VT) general obligation rating to Baa2 from Baa3, affecting $99 million in rated long-term debt. The upgrade of the city’s general obligation rating to Baa2 from Baa3 reflects an improved financial position, although reserves and liquidity remain narrow. The upgrade also incorporates the dismissal of the Burlington Telecom (BT) lawsuit through a settlement agreement that is favorable to the city. The rating also factors in the city’s strength as the economic center of Vermont (Aaa stable) and its manageable debt and pension liability.
- Las Lomitas Elementary School District, CA: Moody’s Investors Service has upgraded to Aa1 from Aa2 the rating on Las Lomitas Elementary School District’s (CA) general obligation bonds outstanding totaling approximately $13.8 million. The upgrade to Aa1 from Aa2 of the district’s general obligation bond rating primarily reflects the financial strength of the district, evidenced by very strong total general fund reserves and very strong general fund liquidity. Reserves have remained stable for several fiscal years and, notably, during the years of economic downturn.
- Will County C.H.S.D. 210 (Lincoln Way), IL: Moody’s Investors Service downgrades Will County Community High School District #210 (Lincoln-Way) IL’s General Obligation (GO) rating to A1 from Aa3. The downgrade to the A1 rating reflects the district’s continued financial decline following five consecutive years of reserve draws, with another material draw projected in the current fiscal year. The rating further incorporates the district’s large yet still declining tax base located in suburban Will County (Aa1) with above average wealth levels; relatively narrow General Fund reserve levels with limited liquidity in the Working Cash Fund; new management team with plans to eliminate the ongoing structural operating deficit; and a high debt burden with extensive use of capital appreciation bonds (CABs).
- Chicago Park District, IL: Moody’s Investors Service has downgraded to Baa1 from A3 the rating on the Chicago Park District, IL’s $616 million of general obligation (GO) debt. The Baa1 rating on the Chicago Park District’s (CPD) GOULT debt reflects the district’s governance ties to the City of Chicago (Baa2 negative). Given the city’s extreme budget pressures, we believe CPD’s financial operations and position could be indirectly affected through city officials’ influence on policy making and budgeting. The Baa1 rating also reflects the district’s highly leveraged tax base, which includes the debt and unfunded pension liabilities of the city and the Chicago Public Schools (CPS) (Baa1 negative).
- Lebanon (City of) OH Water Enterprise: Moody’s Investors Service has downgraded Lebanon (City of) Water Enterprise, OH’s outstanding revenue debt to A1 from Aa3. The A1 rating reflects the enterprise’s modest but stable service area; recent decline in financial operations resulting in narrow debt service coverage despite solid net working capital and unrestricted reserves; moderate debt burden with below average amortization schedule; and satisfactory legal covenants.
- Two Rivers (City of) WI: Moody’s Investors Service has downgraded to Baa2 from Baa1 the rating on the City of Two Rivers, WI’s general obligation (GO) debt. The downgrade to Baa2 is based on the inability of the city to make dramatic improvements to General Fund reserves and the expectation that the negative unassigned General Fund balance will remain weak due to long-term advances to the city’s enterprise funds. The Baa2 rating also incorporates the city’s small tax base, below average resident wealth levels, weak liquidity position, elevated debt, and low pension burden.
- Socorro Consolidated School District 1, NM: Moody’s Investors Service has downgraded to Baa2 from A2 the underlying rating on Socorro Consolidated School District 1, NM’s outstanding general obligation rating. The Baa2 underlying rating reflects the district’s deteriorating financial position after operating deficits as well as the low cash reserves the district maintains. The rating also incorporates the auditor’s finding that the district is in violation of bond covenants through lending debt service funds to support operational expenditures while waiting federal grant reimbursements. The rating further considers the modestly sized tax base and low socioeconomic indicators. The rating is indicative of the district’s low debt burden, but high pension burden.
- Stockbridge Community Schools, MI: Moody’s Investors Service has downgraded to A2 from A1 the general obligation rating of Stockbridge Community Schools, MI. The downgrade to the A2 underlying rating reflects the district’s steady financial deterioration which, as a result of four consecutive operating deficits, has led to narrow reserve and liquidity levels. Also incorporated in the rating is the district’s moderately-sized, semi-rural tax base with advantageous access to employment centers in the greater Lansing (A1) and Ann Arbor (Aa1) metro areas and average socioeconomic characteristics. Further reflected is the district’s declining enrollment trends which have contributed to financial pressures; its below average level of outstanding debt; as well as its exposure to an underfunded cost-sharing pension plan.
- Mount Vernon (City of) NY: Moody’s Investors Service has downgraded to A2 from A1 the rating on the City of Mount Vernon’s (NY) $27 million general obligation debt outstanding and removed the negative outlook. The downgrade to A2 is based on the deterioration of the city’s reserves driven by fund balance appropriations and the inability of the city to increase revenues to keep pace with increasing employee benefit costs and tax certiorari claims. The A2 rating also incorporates the city’s large tax base, average resident wealth levels, low direct debt burden, and amortization of pension payments.
- Albany (City of) GA: Moody’s Investors Service has downgraded to A3 from A1 the rating on Albany, GA’s Sewer Enterprise’s outstanding revenue bonds. The downgrade to A3 reflects the system’s small size, decreasing customer base, which is characterized by customer concentration and below average socioeconomic factors, and a weakened financial position. The rating also incorporates a manageable debt burden and adequate legal provisions.
- Walnut Township Local School District, OH: Moody’s Investors Service has downgraded to Baa2 from A1 the underlying rating on Walnut Township Local School District, OH’s outstanding general obligation unlimited tax (GOULT) debt. The Baa2 reflects the district’s deteriorating financial position, an inability to implement a viable deficit reduction plan, and voters’ recent rejection of an operating levy renewal. Additionally, the rating incorporates the district’s weak election history, limited tax base, and high unfunded pension obligations.