Rating Action: Moody's assigns A1 UND and Aa2 ENH to Lewis and Clark PSD 161, ND's GO bonds; assigns A1 issuer ratingGlobal Credit Research - 05 Feb 2021New York, February 05, 2021 -- Moody's Investors Service has assigned an underlying A1 and enhanced Aa2 rating to Lewis and Clark Public School District 161, ND's $3.5 million General Obligation School Building Refunding Bonds, Taxable Series 2021 and affirmed the A1 underlying rating on the district's previously issued general obligation unlimited tax (GOULT) debt. Concurrently, Moody's has assigned an A1 issuer rating and affirmed the A2 rating on the district's previously issued lease revenue bonds. Post sale the district will have $14.8 million and $1.2 million in rated GOULT and lease debt respectively.RATINGS RATIONALEThe A1 issuer rating, which reflects the district's general credit quality and ability to repay debt and debt-like obligations, incorporates a relatively limited local economy with a heavy concentration in agriculture and the energy sector resulting in a largely stable enrollment that experienced some pandemic related declines in the current year. The rating also incorporates a solid financial position relative to its modestly sized operations, and moderate fixed costs stemming from above average long-term liabilities that are partially offset by the strong condition of district facilities and a lack of additional borrowing plans.The A1 rating on the district's general obligation bonds, including the current issuance, is equivalent to the A1 issuer rating given a pledge of the district's full faith, credit and taxing power as well as an unlimited property tax that is dedicated for debt service and levied upon all taxable property within the district.The Aa2 enhanced rating is based on the security provided by the State of North Dakota Department of Public Instruction's (NDDPI) school district credit enhancement program, as established by state statute. The program rating incorporates adequate program mechanics and the credit quality of the State of North Dakota, which has an issuer rating of Aa1 with a stable outlook. The enhancement program carries the state's outlook. For more information on the state's rating and outlook, please see our most recent Rating Action report for the State of North Dakota dated December 20, 2018.Under the program, established and designed by the State of North Dakota, the bonds are secured by the state's pledge to accelerate state aid that has been appropriated to the district during the current fiscal year should the district be unable to meet debt service requirements. Pursuant to North Dakota code 6-09.4-23, the superintendent of the state Department of Public Instruction (DPI) will intercept aid due to a school district if notified of a potential debt service deficiency. To participate in the program, school districts must adopt a bond resolution and agree to provide a bond counsel opinion as well as file the debt service schedule with the DPI. School districts must also certify to an additional bonds test of two times maximum annual debt service based on school aid available to the district. The district has completed all of the pre- sale requirements for participating in the program. Based on fiscal 2020- 2021 state aid revenues of $3.5 million, the projected available state aid on an August 1 principal payment date for all outstanding issues in the program is approximately 5.7x maximum annual debt service (MADS) of $610,715 million which occurs in 2035. In addition, participation in the intercept program is irrevocable as long as the bonds are outstanding.The A2 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 leased asset of a school facility. All of the district's actively managed general revenue is available for appropriation.RATING OUTLOOKOutlooks are typically not assigned to local governments with this amount of debt.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Reduced economic reliance on agriculture and oil production- Moderation of long-term liabilities- Further bolstering of fund balanceFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Weakening of operating reserves- Growth in long-term leverageLEGAL SECURITYThe district's general obligation bonds, including the current issuance, is secured by the district's GOULT pledge to levy a dedicated property tax levy that is unlimited as to rate or amount.The 2021 bonds are additionally secured by the State of North Dakota Department of Public Instruction's (NDDPI) school district credit enhancement program, which is rated Aa2 and carries a stable outlook.The district's lease revenue debt is secured by lease payments made by the district, from all available revenue, subject to annual appropriation.USE OF PROCEEDSProceeds from the current issuance will be used to refund the district's Series 2014 bonds for net present value savings. The bonds were originally issued to finance various school improvements and additions.PROFILEBased in Berthold, about 25 miles from Minot, ND, Lewis and Clark Public School District 161 provides K-12 services to a population of approximately 2,170 residents. District enrollment totaled 407 students in 2020 and has remained largely stable.METHODOLOGYThe principal methodology used in the underlying rating was US K-12 Public School Districts Methodology published in January 2021 and available at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1202421. The principal methodology used in the enhanced rating was State Aid Intercept Programs and Financings published in December 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1067422. Alternatively, please see the Rating Methodologies page on www.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 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. 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