Moody's Investors Service said it has downgraded to Aa3 from Aa2 the rating on Rock Island County Metropolitan Mass Transit District, Ill.

The Aa3 rating applies to $9.2 million of outstanding general obligation debt.

Debt service on the district's outstanding rated bonds is paid with operating assistance revenues received by the district from the state of Illinois (GO rated A3/negative outlook), though the bonds are ultimately secured by the district's general obligation unlimited tax pledge.

The bonds are secured through a covered abatement in which the district levies for debt service and does not abate the taxes until sufficient alternate revenues (state operating assistance) are received.

The district's only series of outstanding rated GO debt consists of its taxable Build America general obligation alternate revenue bonds, Series 2010B, which financed capital projects, primarily a portion of construction costs of a new transit maintenance facility.

The downgrade to the Aa3 rating reflects the transit district's heavy reliance on the state of Illinois, from which the district receives two-thirds of its operating revenues. The state's credit profile has weakened substantially.

The Aa3 rating also reflects the district's sizable tax base in the Quad Cities region of northwest Illinois; stable financial performance; increased ridership trends; average resident socioeconomic characteristics; and modest debt profile with average principal amortization.

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