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Moody's Investors Service on January 30 upgraded to Baa2 from Baa3 the City of Taylor's General Obligation Limited Tax (GOLT) bonds and bond issued by the Taylor Building Authority impacting $5.2 million of rated debt.
The City's bond ratings have improved consistently over the past three years, according to both Moody's and Fitch Ratings. In 2014, the City's bond ratings hovered in the "junk bond" status due to budgetary problems. At that time, Taylor was operating in a state-mandated Deficit Elimination Plan. But the City's finances have now rebounded from a $5M deficit to a $5.4M unassigned budget balance.
The upgrade to Baa2 will bring the GOLT rating to the same level as Moody's internal assessment of the city's hypothetical GOULT, given the presence of a full faith and credit pledge. The rating action concludes a review undertaken with the publication on December 19, 2016 of the US Local Government General Obligation Debt Methodology.
The Baa2 rating incorporates the city's significantly improved liquidity position that reduces near term operating risks while recognizing substantial challenges ahead given high fixed costs, growing long-term liabilities and relatively weak economic profile.
The Baa2 rating also applies to bonds issued by the Building Authority given rental payments are backed by a GOLT full faith and credit pledge via an unconditional lease agreement.
The stable outlook reflects the expectation that the city's liquidity position will likely remain adequate given substantial recent expenditure reductions.
Factors that Could Lead to an Upgrade
Factors that Could Lead to a Downgrade
Taylor's GOLT bonds are a first budget obligation and secured by its pledge and authority to levy property taxes within statutory and constitutional limitations to pay debt service.
Bonds issued by the City of Taylor Building Authority are secured by lease payments made to the Authority by the city. The lease payments are secured by the city's full faith and credit pledge, equivalent to its pledge on GOLT bonds, and are not subject to appropriation.
Located 15 miles southwest of Detroit (B2 stable) in Wayne County (Ba2 positive), the City of Taylor is near the Detroit Metropolitan Airport. The city encompasses approximately 24 square miles. The city's population has declined in recent decades, and the 2010 Census population of 63,131 reflects a 4.2 percent decline from 2000. The population is estimated to have subsequently declined another 2 percent to 61,568.
The principal methodology used in these ratings was US Local Government General Obligation Debt published in December 2016. The additional methodology used in the lease revenue general obligation limited tax rating was Lease, Appropriation, Moral Obligation and Comparable Debt of US State and Local Government published in July 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.