Moody's new methodology for tax revenue bonds puts 27 ratings on review

By Marisa Wong

Madison, Wis., March 27 - Moody's Investors Service published its new methodology for U.S. municipal bonds backed by special tax revenues, according to a Moody's announcement.

As a result, Moody's has placed 23 ratings on review for possible downgrade and four ratings on review for possible upgrade. The reviews affect a combined $2.7 billion of rated debt.

The ratings and outlooks of the remaining 533 special tax credits are not directly impacted by the introduction of the new methodology.

The methodology applies to more than 425 state and local government bond issuers with more than $200 billion of debt outstanding. The issuers covered have 560 individually rated securities outstanding.

The agency said the main goal is to provide a reference tool for evaluating credit profiles of bonds backed by state or municipal revenues derived from a wide range of special taxes, including sales and excise, income, utility, gas, tourist related and other taxes and fees.

"The rating methodology provides a common framework for the analysis and comparison of a disparate group of credits," Moody's analyst John Medina said in the announcement.

"The methodology largely reflects existing practice and introduces a new scorecard that standardizes the analysis and relative weighting of quantitative and qualitative factors currently considered in our ratings analysis."

Moody's said that in the coming weeks it will focus on issuers' taxable base and revenue pledge, legal security package for the bonds and financial metrics to determine the appropriate ratings.

The agency will also focus on qualitative factors such as fiscal and debt management policies as well as expectations of future tax revenue performance and debt service requirements.

According to the announcement, the following ratings have been placed on review for possible downgrade:

• Baldwin County Board of Education, Ala.'s Aa3 rated sales tax bonds;

• City of Chandler, Ariz.'s Aa2 rated gas tax and motor vehicle fees (HURF) bonds;

• Town of Gilbert, Ariz.'s Aa3 rated gas tax and motor vehicle fees (HURF) bonds;

• Paradise Valley Municipal Property Corp., Ariz.'s Aa1 rated excise taxes and state shared revenue bonds;

• Pima County, Ariz.'s Aa3 rated gas tax and motor vehicle fees (HURF) bonds;

• Scottsdale Preserve Authority, Ariz.'s Aa2 rated sales tax bonds;

• City of Industry, Calif.'s Aa2 rated sales tax bonds;

• St. Johns County, Fla.'s A1 rated sales tax bonds and A2 rated sales tax bonds;

• Carmel Redevelopment Authority, Ind.'s Aa2 rated income tax bonds;

• Jefferson Sales Tax District, La.'s Aa3 rated sales tax bonds;

• Louisiana Public Facilities Authority's A2 rated court filing fees bonds;

• Hennepin County, Minn.'s Aaa (first-lien), Aa2 (second-lien) and Aa3 (third-lien) rated sales tax bonds;

• City of Lincoln, Neb.'s Aa1 rated sales tax bonds;

• Chaves County, N.M.'s A1 rated sales tax bonds;

• Lea County, N.M.'s A1 rated sales tax bonds;

• San Juan County, N.M.'s Aa3 (senior) and A2 (subordinated) rated gas tax and motor vehicle fees bonds;

• Hamilton County, Ohio's A1 rated sales tax bonds;

• City of Arlington, Texas' A1 rated sales, hotel and rental car tax bonds; and

• Wisconsin Center District's A2 rated hotel, meals and rental car tax bonds.

The following ratings have been placed on review for possible upgrade:

• City of Bessemer, Ala.'s Baa3 rated gas tax bonds;

• Adel-Desoto Community School District, Iowa's A2 rated sales tax bonds;

• Jefferson Davis Parish School Board Sales Tax District 1, La.'s Baa1 rated sales tax bonds; and

• Williams County, N.D.'s Baa2 rated sales tax bonds.

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