Rating Action: Moody's assigns Aaa to Clackamas County, OR's 2020 Full Faith and Credit obligations; outlook stable
Global Credit Research - 29 Jul 2020
New York, July 29, 2020 -- Moody's Investors Service has assigned Aaa ratings to Clackamas County, Oregon's $53.8 million Full Faith and Credit and Refunding Obligations, Series 2020. We maintain Aaa ratings on the county's general obligation unlimited tax (GOULT) bonds, Aaa ratings on parity Full Faith and Credit (FF&C) obligations and Aa2 ratings on the county's Multifamily Housing Revenue Bonds, Series 2013A (Easton Ridge Apartments Project). Post-issuance, the county has $52.5 million outstanding in GOULT bonds, $89.5 million in FF&C obligations, and $15.6 million in outstanding rated Housing Revenue Bonds. The outlook is stable.
The Aaa GOULT rating reflects the large, diverse and well-positioned county economy that participates in the Portland (Aaa stable) metropolitan area with above-average wealth and solid income measures. Reserves are above-average and, favorably, the county's general revenues are primarily from stable and predictable property taxes. We regard the coronavirus as a social consideration and we expect the county is, on average, less exposed to the economic volatility than peers nationally, due to a revenue structure that is less dependent on economically sensitive revenue. However, shifting economic and social conditions may still require the county to adjust expenses given some dependence on intergovernmental revenue across all funds. Strong financial management and solid financial policies strengthen the credit profile of the county, providing an important mitigant to ongoing pandemic risks. Fixed costs are elevated compared to peers nationally, with pensions the primary driver of recent cost increases, and pension liabilities are also above-average compared to operating revenue. However, debt liabilities and costs remain modest, which somewhat balances the elevated pension measures.
The Aaa ratings on the county's FF&C obligations reflects the general credit characteristics of the county as well as the legal security of the bonds, which carry the county's full faith and credit pledge. The absence of a rating distinction between the GOULT rating and the FF&C ratings reflects our view of the strength of the full faith and credit pledge in Oregon, which we typically rate at the same level as the GOULT or issuer rating.
The Aa2 ratings on the county's Multifamily Housing Revenue Bonds reflects the general credit characteristics of the county and a two-notch rating distinction from the county's GOULT rating. The county's commitment is to make loans to the authority to replenish the debt service reserve fund for the Series 2013A bonds, if necessary, and is subject to appropriation by the county. The bonds are rated as contingent obligations (more specifically, moral obligations) and the leased assets are considered essential.
The stable outlook reflects expected stable reserves and continued manageable increases in the county's pension costs and liabilities, keeping pace with other issuers in Oregon that rely on the state's pension system.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
-Material decline in the county's financial position
-Substantial tax base or socioeconomic declines
-Significant growth in leverage, especially if contribution increases pressure the county's strong reserves
The GOULT bonds are secured by the county's full faith, credit, and unlimited property tax pledge. Debt service for GOULT bonds in Oregon is funded by a separate property tax levy that is dedicated to bondholders and secured through statute, a beneficial credit strength for bondholders.
The FF&C obligations are secured by the county's full faith and credit pledge, and an absolute and unconditional obligation to make payment from all legally available funds, not subject to appropriation.
The Housing Revenue bonds are secured by the project's revenues, a security interest in the project, legally available general revenues of the county's housing authority, and a contingent loan agreement with the county. The county's commitment is to make loans to the authority to replenish the debt service reserve fund for the Series 2013A bonds, if necessary, and is subject to appropriation by the county.
USE OF PROCEEDS
Proceeds of the 2020 FF&C obligations will be used for the county's road maintenance and repair facility, preparation for future construction projects, upgrades to technology, as well as refinancing existing FF&C obligations.
Clackamas County comprises 1,879 square miles in northern Oregon, stretching from the southeast portion of the Portland metro area to Mt. Hood National Forest, including, urban, suburban and rural areas. The county is the third most populous in the state with about 406,000 residents (as of the 2018 American Community Survey). County services primarily include public protection, health and human services, public ways and facilities, and culture and recreation.
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.
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_1133569.
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 Tatiana Killen Additional Contact PF General Administration 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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