Rating Action: Moody's assigns Aa1 to Bexar Co. Hospital District, TX's GOLTs; outlook stableGlobal Credit Research - 01 Sep 2022New York, September 01, 2022 -- Moody's Investors Service has assigned a Aa1 rating to Bexar County Hospital District, TX's $300 million Certificates of Obligation, Series 2022. Moody's maintains the district's Aa1 issuer rating and the Aa1 rating on the district's outstanding general obligation limited tax (GOLT) debt. The issuer rating represents Moody's assessment of debt supported by a general obligation unlimited tax (GOULT) pledge. The district does not have any debt supported by a GOULT pledge. Including the current offering, the district has roughly $1.2 billion of debt outstanding. The outlook is stable.RATINGS RATIONALEThe Aa1 issuer rating reflects the district's very large and expanding tax base supported by institutional presence and an overall healthy local economy, a stable financial profile with strong cash levels, which may experience a modest decline over the next few years from cash funded capital projects, and a manageable debt and pension profile with low fixed costs. The rating further incorporates the hospital district's role as a key healthcare provider and teaching hospital as well as the inherent enterprise risk associated with operating a hospital which remains challenged by a reliance on governmental payors.The Aa1 GOLT rating is the same as the issuer rating given the ample taxing headroom of 1,865% (18.7 times) under the statutory tax rate cap that generates dedicated property taxes sufficient to pay debt service. This offsets the inability of the district to exceed the limited rate and the lack of a full faith and credit pledge.RATING OUTLOOKThe stable outlook reflects the hospital's important role within the county that will continue to support stable operations. Although the district plans to cash-fund a portion of its capital projects in the next couple of years, steady property tax revenue growth from the district's large and diverse tax base coupled with conservating budgeting practices should enable the district to maintain a solid financial metrics. FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING- Material improvement in cash reserves coupled with a sustained trend of strong operating cash flow marginsFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING- Significant reduction in federal, state, or local funding leading to weaker operating performance- Material deterioration of cash levels- Weakened performance in the health plan that pressures the district's liquidity- Substantial tax base contraction- Additional leverage without corresponding tax base and operating revenue growthLEGAL SECURITYThe outstanding GOLT debt is payable from an ad valorem tax levied within the limits prescribed by law on all taxable property within the district. The district's total tax rate, including any levy for debt service, cannot exceed $7.50 per $1,000 of AV. The certificates of obligation are payable from the same GOLT pledge plus $1,000 of surplus revenues from the hospital system. The general obligation (GO) pledge is further secured by statute.USE OF PROCEEDSThe certificates will be used to construct and equip two new community hospitals and other healthcare facilities, along with paying the cost of professional services related to the acquisition, design, construction, project management, and financing of the projects.PROFILEBexar County Hospital District is a county-wide hospital district coterminous with Bexar County (Aaa stable). The county covers approximately 1,250 square miles in south central Texas (Aaa stable). The district provides medical and hospital care to the county's indigent population, operates a Level I adult and pediatric trauma center which provides trauma care to San Antonio (Aaa stable) and the surrounding 22 counties, as well as provides tertiary medical care to residents throughout south Texas. In 2020, the county had an estimated population of nearly 2 million.METHODOLOGYThe principal methodology used in this rating was US Local Government General Obligation Debt published in January 2021 and available at https://ratings.moodys.com/api/rmc-documents/70015. An additional methodology used in this rating was Not-For-Profit Healthcare published in December 2018 and available at https://ratings.moodys.com/api/rmc-documents/70886. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies.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 on https://ratings.moodys.com/rating-definitions.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 issuer/deal page for the respective issuer on https://ratings.moodys.com.The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.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://ratings.moodys.com/documents/PBC_1288235.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 https://ratings.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. Nathan Phelps Lead Analyst REGIONAL_SOUTHWEST Moody's Investors Service, Inc. 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