Moody's·13 min read
Rating Action: Moody's assigns Aa1 to Minnetonka ISD 276, MN's COPs; outlook stableGlobal Credit Research - 26 Jan 2022New York, January 26, 2022 -- Moody's Investors Service has assigned a Aa1 rating to Minnetonka Independent School District 276, MN's $7 million Certificates of Participation, Series 2022A. Moody's maintains the district's Aaa issuer rating, Aaa general obligation unlimited tax (GOULT) rating, Aa1 ratings on outstanding certificates of participation (COPs) issued for more essential purposes and Aa2 ratings on outstanding certificates of participation (COPs) issued for less essential purposes. The issuer rating reflects the district's ability to repay debt and debt-like obligations without consideration of any pledge, security, or structural features. Following the sale, the district will have $114 million of GOULT bonds (Aaa), $59 million of COPs for more essential purposes and $6 million of COPS for less essential purposes. The outlook is stable.RATINGS RATIONALEThe Aaa issuer rating reflects the district's wealthy and high-income tax base in the Twin Cities (Minneapolis, Aa1 stable; St. Paul, Aa1 stable) metropolitan area and growing enrollment that positively affects operating revenue. The district benefits from strong open enrollment trends with more than 3,500 of the 11,000 students enrolling from surrounding districts. The rating also incorporates the expectation that reserves will grow modestly in fiscal 2022 following recent draws for pandemic-related technology needs, capital projects and temporary instructional staff. Also considered in the rating is the district's leverage that is higher than similarly rated peers nationally but modest fixed costs.The Aa1 rating on the COPs issued for more essential purposes, including the 2022A COPs, reflects the risk of non-appropriation for lease payments and the more essential nature of the pledged assets, which include school facilities.RATING OUTLOOKThe stable outlook reflects the expectation that the district's financial reserves will remain sound, supported by positive enrollment trends and the district's conservative financial management. The outlook also includes an expectation that the debt burden will not materially increase.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING- Not applicableFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING- Considerable weakening of the district's tax base or resident incomes- Weakening of reserves or liquidity- Material increases to the debt burden or unfunded retirement liabilitiesLEGAL SECURITYThe Series 2022A COPs, along with the other outstanding COPs that were issued for more essential purposes, are supported by district's pledge to make rental payments, subject to annual appropriation. The pledged assets include district facilities and expansions, which we deem to be more essential assets.USE OF PROCEEDSThe Series 2022A COPs will finance the construction and equipping of a new career technical education center, which will be a pledged asset once construction is completed.PROFILEThe district is located west of the Twin Cities in the western portion of Hennepin County (Aaa stable) and has a population of approximately 41,000 residents. The district has an enrollment of about 11,200 students. The district serves several affluent suburban communities west of Minneapolis (Aa1 stable) including the cities of Minnetonka (Aaa), Deephaven (Aaa stable), Excelsior (Aa3), Greenwood, Tonka Bay, and Woodland.METHODOLOGYThe principal methodology used in this rating was US K-12 Public School Districts Methodology published in January 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1202421. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.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. 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