Ohio School District Credit Enhancement Prog. — Moody’s upgrades Toledo City School

Rating Action: Moody’s upgrades Toledo City School District, OH’s Issuer and Underlying rating to A1 from A2Global Credit Research – 27 Jan 2022New York, January 27, 2022 — Moody’s Investors Service has upgraded to A1 from A2 the issuer and general obligation unlimited tax (GOULT) ratings of Toledo City School District, OH. The issuer rating reflects the district’s ability to repay debt and debt-like obligations without consideration of any pledge, security, or structural features. Concurrently, Moody’s assigns an underlying A1 and enhanced Aa2 rating to the district’s $17.3 million General Obligation (Unlimited Tax) School Facilities Improvement Refunding Bonds, Series 2022. Following the current refunding sale the district will have a total of $87.7 million in outstanding GOULT bonded debt, all of which is Moody’s rated. The stable outlook has been removed.RATINGS RATIONALEThe upgrade of the issuer rating to A1 reflects the district’s sustained trend of positive operations which has resulted in the steady bolstering of fund balance and liquidity. Additionally incorporated, is the district’s improved academic performance which has enhanced student retention and increased the district’s market share of students that reside within its borders. These factors help to balance the district’s weak economic fundamentals and declining population trends that will likely limit student enrollment growth over the long term. The rating also considers the budgetary support of substantial COVID-related federal funding, as well as the district’s moderate long-term leverage and relatively low annual fixed cost burden.The A1 GOULT rating is equivalent to the issuer rating based on the district’s general obligation full faith and credit pledge as well as an unlimited property tax that is dedicated to debt service.The Aa2 enhanced rating reflects our assessment of the Ohio School District Credit Enhancement Program (OSDCEP), which is rated one notch below the State of Ohio’s (Aa1 stable) GO rating. Interceptable funds include the district’s annual state aid appropriations, which may continue to be intercepted until a debt service shortfall is fully paid. Estimated fiscal 2022 interceptable aid for the district provides for 14.3x coverage of maximum annual debt service on the district’s enhanced debt. Program mechanics require a third-party fiscal agent to notify the state to intercept aid if debt service is not received at least fifteen days prior to its due date. Once the state confirms that the district is unable to meet debt service payments within three days prior to the debt service payment date, it must deposit the intercepted aid by 2PM the day before debt service is due. The Huntington National Bank (A3 stable) will sign a paying agent agreement in accordance with the administrative code requirements. Moody’s has received a copy of the approval letter from both the Ohio Department of Education and Ohio Office of Budget and Management, the program administrators.RATING OUTLOOKOutlooks are typically not assigned to local governments with this amount of debt.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Material strengthening to the district’s economic fundamentals- Sustained student enrollment growth- Moderation of the district’s pension burden- Upward movement in the State of Ohio’s general obligation rating (enhanced)FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Material economic or tax base contraction- Persistent declines to student enrollment- Pronounced narrowing of operating fund balance or liquidity- Significant increase to the district’s debt or pension burdens- Downward movement in the State of Ohio’s GO rating (enhanced)- Weakening of the OSDCEP mechanics (enhanced)LEGAL SECURITYThe district’s bonds, including the Series 2022 bonds, are general obligations of the district supported by its full faith and credit and pledge to levy ad valorem property taxes to pay debt service unlimited as to rate or amount. The bonds are further enhanced by its qualification to the OSDCEP.USE OF PROCEEDSThe Series 2022 bonds will be issued to currently refund for debt service cost savings portions of the district’s outstanding School Facilities Improvement Refunding Bonds, Series 2012.PROFILEToledo City School District, also known as Toledo Public Schools (TPS), is the 4th largest public school district in the State of Ohio (Aa1 stable) and provides pre-kindergarten through 12th grade education to approximately 22,000 students for the 2021-2022 school year. Located in Lucas County (Aa2), the district’s territory borders on Lake Erie and encompasses approximately 70% of the City of Toledo (A2 stable), and portions of two townships and one village.METHODOLOGYThe principal methodology used in the issuer and underlying ratings was US K-12 Public School Districts Methodology published in January 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1202421. The principal methodology used in the enhanced rating was State Aid Intercept Programs and Financings published in December 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1067422. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies. REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website 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.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.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. Andrew Van Dyck Dobos Lead Analyst REGIONAL_MIDWEST Moody’s Investors Service, Inc. 100 N Riverside Plaza Suite 2220 Chicago 60606 JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Gera McGuire Additional Contact REGIONAL_SOUTHWEST JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody’s Investors…