New York, December 11, 2014 — Moody’s Investors Service has affirmed the A1 rating on the City of Kennedale’s, TX $565 thousand in outstanding certificates of obligation. {{more}}The certificates are direct obligations of the city and are secured by the ad valorem tax levy within the limits prescribed by law as well as a subordinate lien on surplus revenues of the city’s Waterworks and Sewer System. Kennedale has approximately $16.5 million in debt including long-term obligations not rated by Moody’s.
SUMMARY RATING RATIONALE
The A1 affirmation is based primarily on improvements to the local economy evidenced by residential and commercial development activity as well as expected growth in total full value. The rating action also takes into account the multi-year draws on reserves to levels below similarly rated peers, and moderate debt burden with average principal payout.
STRENGTHS
– Expanding and diversifying tax base
– Improving socioeconomic profile
CHALLENGES
– Narrowing reserve levels below similarly rated peers
– Persistent structural imbalance
– Moderate debt burden
WHAT COULD CHANGE THE RATING UP
– Significantly improved reserve levels
– Large tax base expansion
WHAT COULD CHANGE THE RATING DOWN
– Failure to return to structural balance and replenish reserves
– Increased debt burden without offsetting increases in full value
RATING METHODOLOGY
The principal methodology used in this rating was US Local Government General Obligation Debt published in January 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
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 rating action on the support provider and in relation to each particular 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.
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