The press release (posted below) states:
The Aa2 underlying rating reflects the district's large tax base with wealth levels above the state and national medians, satisfactory reserve levels, a modest debt burden, and below-average pension liabilities.
But it later adds:
The negative outlook on the enhanced rating reflects the weakening profile of New Jersey's public school districts (weighted-average rating of A1) and the State of New Jersey (GO rated A1 negative).
The ratings are for $16.8 million of new bonds and $46.3 million of outstanding bonds.
See the release below:
Moody's assigns Aa2 underlying/Aa3 enhanced to South Orange-Maplewood SD, NJ's $16.8M Ser. 2015 GO bonds
Global Credit Research - 22 Jan 2015
Affirms Aa2 Underlying/Aa3 enhanced on $46.3M outstanding bonds
New York, January 22, 2015 --Moody's Rating
Issue: School Refunding Bonds, Series 2015; Underlying Rating: Aa2; Enhanced Rating: Aa3; Sale Amount: $16,800,000; Expected Sale Date: 02-03-2015; Rating Description: General Obligation
Opinion
Moody's Investors Service has assigned a Aa2 underlying and Aa3 enhanced rating to the South Orange-Maplewood School District's (NJ) $16.8 million School Refunding Bonds, Series 2015. Concurrently, we have affirmed the Aa2 underlying and Aa3 enhanced ratings on $46.3 million of outstanding parity bonds.
SUMMARY RATING RATIONALE
The Aa2 underlying rating reflects the district's large tax base with wealth levels above the state and national medians, satisfactory reserve levels, a modest debt burden, and below-average pension liabilities.
The Aa3 enhanced rating with a negative outlook reflects Moody's assessment of the Chapter 72 enhancement program's ability to make timely payments on its guaranteed debt, should the need arise. Additional credit considerations supporting the Aa3 rating on the Chapter 72 program include the declined but still adequate credit quality of New Jersey school district debt guaranteed by the program; the reserve corpus' statutory protections as part of a constitutionally protected trust fund established for the purpose of generating income to fund public education in New Jersey; and statutory provisions facilitating timely reimbursement of the corpus following a draw through the interception of state aid moneys appropriated for issuers.
OUTLOOK
The negative outlook on the enhanced rating reflects the weakening profile of New Jersey's public school districts (weighted-average rating of A1) and the State of New Jersey (GO rated A1 negative).
WHAT COULD MAKE THE RATING GO UP
• Significant increases to reserve and liquidity levels
• Substantial tax base expansion
WHAT COULD MAKE THE RATING GO DOWN
• Material declines in fund balance and liquidity levels
• Deterioration of the district's tax base and wealth levels
OBLIGOR PROFILE
The district serves 6,760 students in the Township of Maplewood and Village of South Orange.
LEGAL SECURITY
The bond are secured by the district's general obligation unlimited ad valorem tax pledge.
USE OF PROCEEDS
Proceeds of the 2015 bonds will be used to refund the district's 2005 and 2008 bonds.
PRINCIPAL METHODOLOGY
The principal methodology used in the underlying rating was US Local Government General Obligation Debt published in January 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
The enhanced rating reflects our assessment of the Reserve's ability to make payments on the guarantee relative to the value of the fund corpus. Additional considerations include (1) the program's adequate constitutional and statutory protections with effective guarantee and reimbursement mechanisms, (2) an adequate but highly leveraged capital base with conservative management of corpus investments, (3) NJ school districts' adequate but declining weighted average credit quality (weighted average rating of A1), active state oversight of public school finances and (4) the state's A1 underlying general obligation rating with negative outlook.
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