Lyons, Kan., Downgraded to A-Minus by S&P

Standard & Poor's Ratings Services said it lowered its long-term rating to A-minus from A on the city of Lyons, Kan.'s existing general obligation bonds and on Lyons Public Building Commission's existing GO bonds issued on behalf of the city.

The outlook is stable.

"The downgrade reflects the city's history of thinning reserves and weak financial performance," explained Standard & Poor's credit analyst Daniel Cuddy.

The rating reflects the city's: self-sufficient and stable economy, and access to the cities of Hutchinson, McPherson, and Great Bend for additional jobs; and moderate overall debt burden on a per-capita basis, coupled with limited future capital plans.

The preceding credit strengths are partly offset by the city's: adequate-to-low incomes and market value per capita; and low financial performance on a cash basis of accounting.

The city's GO bonds are secured by an unlimited ad valorem tax on all taxable property in the city. However, annual base rentals, which the city covenants to pay to the trustee, payable by the city under the lease but not subject to annual renewal by the city, secure the PBC's revenue bonds and constitute an unconditional obligation of the city. The city must levy ad valorem taxes, if necessary, to pay debt service on these bonds.

Furthermore, according to legal opinion, the lease cannot be terminated due to nonappropriation. In the event of a default (as defined under the lease agreement) that results in a judgment against the city, the city will be required to levy taxes or otherwise provide sufficient funds to meet judgment requirements. Therefore, S&P rates the PBC's revenue bonds on par with the city's GO rating.

Lyons has an estimated population of about 3,740, and is in Rice County in central Kansas, about 32 miles northwest of Hutchinson, 30 miles west of McPherson, and 31 miles east of Great Bend.

"The stable outlook reflects our expectation that city officials will manage Lyons' financial position to maintain sufficient liquidity while the Federal Aviation Administration payments are pending," added Cuddy. In addition, it reflects the expectation the city will continue to approach its general fund cash reserve policy of $250,000.

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