Moody’s Investors Service has downgraded 11 issuers of special tax-supported bonds and upgraded three of them.
In March Moody’s announced a new rating methodology for special tax revenue bonds. The methodology applied to 560 rated municipal securities.
The methodology is for non-property tax-secured bonds issued by local and state governments. Some of the special taxes covered include sales and excise taxes, tourist-related taxes and fees, income taxes, utility service taxes, gas taxes, stadium-related taxes, real property taxes, court fees and other levies.
In March, Moody’s placed 27 ratings on review for possible changes. Over the last several months it has come out with ratings for all but one, which it withdrew. Twelve ratings were left unchanged.
Moody’s downgraded special tax bonds issued by Chandler, Ariz., to Aa3 from Aa2; Pima County, Ariz., to A1 from Aa3; Industry, Calif., to A1 from Aa2; Chicago to Aa3 from Aa2; Carmel Redevelopment Authority, Ind., to A2 from Aa2; Jefferson Parish Sales Tax District, La., to A2 from Aa3; Hennepin County, Minn., (first lien) to Aa1 from Aaa; Lincoln, Neb., to Aa2 from Aa1; San Juan County, N.M., (senior debt) to A2 from Aa3; and Hamilton County, Ohio, to A2 from A1.
The revised outlooks are all stable except for Carmel, San Juan and Lincoln, which have no outlooks, and for the Louisiana Public Facilities Authority, which is negative.
Moody’s upgraded Iowa’s Adel-Desoto Community School District to A1 from A2, Jefferson Davis Parish School Board Sales Tax District 1, La., to A3 from Baa1, and Williams County, N.D., to A1 from Baa2. None of the ratings have outlooks.
Moody’s downgraded three issues from Hamilton County, Ohio. Those issues total about $559 million, said county debt manager Karen McFarland. The county, with 802,000 in population in 2010, used the money to build stadiums for the Cincinnati Bengals and Reds, a professional football and baseball team, respectively.
In the case of Chicago, Moody’s downgraded $578 million of sales-tax-backed bonds. Moody’s was concerned about the lack of legal separation between the pledged sales tax revenues and the city’s general operations.
Moody’s downgraded Pima County, Ariz., bonds totaling $82 million in outstanding principal used for road construction projects, said Pima County finance and risk management director Tom Burke. Revenue for the bonds came from gas taxes and car registration fees. The state collects the money and funnels a portion of the money to the counties, Burke said. Moody’s was concerned about the potential for the state to divert the money.
Pima County, with a population of 980,000 in 2010, no longer uses Moody’s to rate its bonds, Burke said.