Watertown, Wis., Downgraded to Aa3 by Moody's

Moody's Investors Service said it has downgraded the ratings on the city of Watertown, Wis.'s long-term general obligation unlimited tax rating to Aa3 from Aa2 and the Community Development Authority lease revenue debt to A2 from A1.

Concurrently, Moody's has assigned an Aa3 rating to the city's $7.7 million general obligation refunding bonds and $1.6 million general obligation promissory notes, and downgraded the rating to Aa3 from Aa2 on the city's outstanding general obligation unlimited tax debt and A2 from A1 on the city's outstanding community development authority lease revenue debt.

The Aa3 rating applies to the city's $47.7 million of outstanding post-sale general obligation debt and the A2 rating applies to $1.3 million of outstanding post-sale community development authority lease revenue debt.

The bonds and notes are secured by the city's general obligation unlimited tax pledge. Proceeds of the bonds will be used to refund the Series 2002 general obligation refunding bonds and portions of the city's outstanding Series 2001, 2003, and 2005 general obligation bonds.

The bonds will also refund a portion of the Series 2006A Community Development Authority lease revenue bonds for a combined estimated net present value savings of $447,000 or 5.9% of refunding par. The refundings are strictly for savings with no extension to the maturities of the refunded debt.

The notes will be used for various public purposes, including financing street and sidewalk improvement projects and acquisition of municipal vehicles and equipment.

The downgrade of Watertown's ratings reflects the city's modestly sized tax base that has recently experienced significant declines in valuation, as well as declining socioeconomic indicators; satisfactory financial position due to consecutive operating surpluses; and an elevated debt burden.

The two notch distinction between the lease revenue debt rating and the GO rating reflects risk of non-appropriation and the non-essentiality of the project financed (provided storm water infrastructure improvements to a Tax Increment District (TID) No. 4).

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