Provo City School District, UT — Moody’s assigns Aa2 underlying/Aaa enhanced to Provo City SD, UT’s 2021 GOULT bonds; outlook stable

Rating Action: Moody’s assigns Aa2 underlying/Aaa enhanced to Provo City SD, UT’s 2021 GOULT bonds; outlook stableGlobal Credit Research – 15 Mar 2021New York, March 15, 2021 — Moody’s Investors Service has assigned an underlying Aa2 rating to Provo City School District, Utah’s $74.4 million General Obligation Bonds (Utah School District Bond GuarantyProgram), Series 2021. The bonds will also receive the Aaa rating of the State of Utah’s School District Bond Guaranty Program. Concurrently, Moody’s affirmed the district’s Aa2 issuer rating. The issuer rating reflects the district’s ability to repay debt and debt-like obligations without consideration of any pledge, security or structural features. We also affirmed the Aa2 rating on the district’s outstanding GOULT debt, affecting approximately $102.2 million in GOULT bonds. The outlook is stable.RATINGS RATIONALEThe Aa2 issuer rating, which reflects the district’s fundamental credit quality and intrinsic credit strengths, incorporates the district’s location in the expanding Provo-Orem metropolitan area with a strong and growing local economy and the stabilizing presence of Brigham Young University. The district maintains a healthy and stable financial profile driven by strong policies and conservative management. The district has below average resident wealth levels reflecting the high university student population and very low median age of residents. Despite some movement in enrollment surrounding the district’s online school, actual district enrollment has been generally flat to growing which is the expectation going forward. Overall leverage is elevated but manageable and fixed costs are low.The rating assigned to the district’s general obligation bonds is equivalent to its Aa2 issuer rating, based on the district’s unlimited property tax pledge that is dedicated to debt service.The Aaa enhanced rating is based on the additional security provided to bondholders by the Utah School District Bond Guaranty Program (Aaa stable). Under this program, the state’s full faith and credit guarantees debt service payments by transfer of the state’s general funds to the paying agent in the event of a shortfall for the district.RATING OUTLOOKThe stable outlook reflects our expectation that the district will maintain a healthy financial profile and that enrollment will stay stable to increasing in the medium term.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Material improvement in socioeconomic measures- Material reduction in overall leverageFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Material weakening of district reserves- Increase to leverage or fixed costsLEGAL SECURITYThe general obligation bonds are secured by the district’s unlimited property tax pledge.The Utah School District Bond Guaranty Program pledges the State of Utah’s (Aaa stable) full faith and credit to make whole any shortfall in debt service by the district, if necessary, on a timely basis for payment to bondholders.USE OF PROCEEDSProceeds from the sale will be used to partially reconstruct and stabilize Timpview High School.PROFILELocated in Utah County and coterminous with Provo City, the district covers 44 square miles and serves a local population of 116,000. Located within the district’s boundaries is Brigham Young University and its student population of nearly 30,000. The district operates 13 grade k-6 elementary schools, two grade 7-9 middle schools, two traditional grade 10-12 high schools, one eSchool (online), one preschool, one adult education institution and one transition services high school. Enrollment was 13,284 for the 2021 school year.METHODOLOGY The principal methodology used in the 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 Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1068154. 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. 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