Moody's Investors Service has downgraded Washington Township Health Care District, Calif.'s long-term general obligation bond rating to Aa3 from Aa2, affecting $70.4 million of rated general obligation bonds secured by the district's voter-approved unlimited property tax pledge.
The GO rating will remain on review for downgrade.
On August 31, 2012, Moody's has also placed the district's Baa1 long term revenue bond rating on review for downgrade, affecting $232 million of rated revenue bonds outstanding.
The downgrade reflects the district's expected fiscal year (FY) 2012 operating losses, and the review for downgrade reflects new information provided by the district that suggests further erosion of its financial profile.
The current rating action on the GO bonds incorporates the analysis from both the June 20, 2012 downgrade of the district's revenue bonds, and the recent August 31 placement of the district's revenue bonds on the review for downgrade.
While the pledged tax revenue of the GO bonds is legally separate from the district's operational revenue, the district's financial profile nevertheless accounts for a substantial portion of the district's overall credit quality, as reflected in the GO rating.
Offsetting the weakness of the district's financial profile is its otherwise healthy economic profile and manageable debt profile. The district's large-sized San Francisco Bay Area tax base has proven resilient in light of recent factory closures.
The strength of the district's economic profile will continue to be an important factor for the GO rating despite its challenged financial profile.
Moody's will complete its review within 90 days. At that time Moody's will review both the GO and revenue bonds.