Moody's Investors Service said it has downgraded to A2 from A1 the city of Chillicothe, Ohio's long-term general obligation limited tax rating, affecting $6.5 million of outstanding long-term debt.
Concurrently, Moody's has assigned a MIG 1 rating to the city's $2.7 million various purpose (general obligation limited tax) bond anticipation notes, Series 2014. The BANs are secured by the city's general obligation limited tax pledge subject to the state of Ohio's (GO rated Aa1/stable outlook) 10-mill limitation.
Proceeds will be used to retire the city's outstanding $2.4 million water system improvement (general obligation limited tax) bond anticipation notes, Series 2013 due March 7, 2014, which were issued for the purpose of improving the city's water system.
The remaining $300,000 in new money BAN proceeds will be used to finance equipment acquisitions. The Series 2014 BANs mature on March 7, 2015, and are expected to be taken out with another round of short-term, roll-over borrowing. The negative outlook previously associated with the city's rating has been removed.
The A2 long-term rating reflects the city's narrow general fund reserves which are dependent on relatively pressured revenue sources; moderately sized tax base which serves as the economic center of Ross County (GOLT rated Aa2); below average resident wealth profile; and manageable debt burden with elevated exposure to unfunded post-retirement pension obligations.
The MIG 1 short-term rating is based on the expectation of market access for the take-out refinancing given the city's history of successful marketing of notes and bonds, scheduled sale sufficiently in advance of the current note maturity, as well as the credit quality reflected in the city's A2 long-term general obligation rating.
