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Gahanna-Jefferson City School District, OH -- Moody's downgrades Gahanna-Jefferson CSD, OH's GO to Aa3 & assigns Aa3 issuer rating

·13 min read

Rating Action: Moody's downgrades Gahanna-Jefferson CSD, OH's GO to Aa3 & assigns Aa3 issuer ratingGlobal Credit Research - 05 Feb 2021New York, February 05, 2021 -- Moody's Investors Service has downgraded the ratings on Gahanna-Jefferson City School District, OH's general obligation unlimited tax (GOULT) bonds, general obligation limited tax (GOLT) bonds, and tax anticipation notes (GOLT) to Aa3 from Aa2. Moody's has also downgraded the rating on the district's Certificates of Participation (COPs) to A1 from Aa3. Concurrently, Moody's has assigned a Aa3 issuer rating to the district, a Aa3 rating to the district's $206 million School Facilities Construction and Improvement Bonds, Series 2021 (General Obligation - Unlimited Tax) and an A1 rating to the district's $44 million Certificates of Participation (Gahanna-Jefferson City School District, Franklin County, Ohio School Facilities Project), Series 2021. Post-sale, the district will have $249 million of general obligation debt outstanding and $44 million of COPs.RATINGS RATIONALEThe Aa3 issuer rating, which reflects the district's general credit quality and ability to repay debt and debt-like obligations, incorporates a substantial increase in leverage from the current issuance to fund long-term facility needs and accommodate growing enrollment. As such, overall leverage and associated fixed costs will remain high for several years. The rating also incorporates the district's strong economic base near major employers and institutions in the Columbus area, which will continue to support its strong resident income levels and growing enrollment trend, as well as a healthy financial position that will improve from recent passage of a new operating levy.The Aa3 rating on the district's general obligation unlimited tax bonds was downgraded one notch because it is equivalent to the issuer rating. The district has pledged its full faith and credit as well as an unlimited property tax to pay debt service on the bonds.The Aa3 rating on the district's general obligation limited tax bonds is also equivalent to the issuer rating, reflecting the limited tax pledge that also benefits from an additional general promise to pay. The district has pledged its full faith and credit to pay debt service on the bonds as well as its property tax millage within the state's ten mill limitation. This is an active pledge, and the tax is levied on the district's entire tax base.The Aa3 rating on the district's tax anticipation notes is the same as the issuer rating due to the ample taxing headroom of over 2.5 maximum annual debt service provided by the pledged permanent improvement tax, which is levied on all taxable property within the district.The A1 rating on the district's lease revenue bonds is one notch below the issuer rating, reflecting the contingent nature of the pledge, which is subject to annual appropriation, and the more essential financed projects, a learning center and high school building. All of the district's actively managed general revenue is available for appropriation.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 improvement in fund balance and liquidity- Reduction in long-term liabilities and fixed-costs ratiosFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Significant decline in available fund balance or liquidity- Further increase in leverage or fixed-costsLEGAL SECURITYThe district's GOULT bonds, including the Series 2021, are secured by the district's pledge and authorization to levy a dedicated property tax that is unlimited as to rate or amount.The general obligation limited tax bonds are secured by the district's full faith and credit to pay debt service on the bonds as well as its property tax millage within the state's ten mill limitation.The tax anticipation notes (GOLT) are secured by the district's 2.16 mill permanent improvement tax, which is levied on all taxable property within the district. The tax was approved by voters in 2014 and does not expire.The Certificates of Participation, including the Series 2021, are secured by lease payments from the district that are subject to annual appropriation.USE OF PROCEEDSProceeds of the Series 2021 GOULT bonds and Series 2021 COPS will fund construction of school buildings, including a new high school and additions to two elementary schools and three middle schools.OBLIGOR PROFILEGahanna-Jefferson City School District encompasses approximately 28 square miles of Franklin County (Aaa stable) in central Ohio (Aa1 stable). The district serves nearly all of the City of Gahanna (Aa1) as well as parts of Jefferson and Mifflin Townships. A small part of the district lies within the City of Columbus. The district provides pre-kindergarten through twelfth grade education for approximately 7,800 students in a community of roughly 48,000 residents.METHODOLOGYThe principal methodology used in these rating 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.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.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. 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