New Issue: Moody's assigns A1 to Ford County USD No. 443's (KS) GOs Series 2015-A and Series 2015-B

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1 New Issue: Moody's assigns A1 to Ford County USD No. 443's (KS) GOs Series 2015-A and Series 2015-B Global Credit Research - 08 Oct 2015 Affirms outstanding ratings; affects debt totaling $100M FORD COUNTY UNIFIED SCHOOL DISTRICT 443 (DODGE CITY), KS Public K-12 School Districts KS Moody's Rating ISSUE General Obligation Bonds, Series A Sale Amount $85,600,000 Expected Sale Date 10/12/15 Rating Description General Obligation General Obligation Refunding Bonds, Series B Sale Amount $10,175,000 Expected Sale Date 10/12/15 Rating Description General Obligation RATING A1 A1 Moody's Outlook NOO NEW YORK, October 08, Moody's Investors Service has assigned an A1 rating to Ford County Unified School District No. 443's (Dodge City, KS) $85.6 million General Obligation Bonds, Series 2015-A, and $10.2 million General Obligation Refunding Bonds, Series 2015-B. Concurrently, Moody's has affirmed the A1 rating on the district's outstanding general obligation debt, and the A2 rating on the district's outstanding lease revenue debt. Post-sale, the district will have $99.9 million general obligation debt outstanding and $1.0 million of lease revenue debt outstanding. SUMMARY RATING RATIONALE The A1 rating reflects the district's moderately-sized tax base in southwest Kansas (long-term rated Aa2/Stable outlook) with growing enrollment; satisfactory financial operations within the parameters of the state education funding structure; and an elevated debt burden, somewhat mitigated by state support. The A2 lease revenue rating reflects, adequate legal structure, annual non-appropriation and the essentiality of the pledged asset. OUTLOOK Moody's does not generally assign outlooks to local government credits with this amount of debt outstanding. WHAT COULD MAKE THE RATING GO UP - Strengthening of the district's tax base and socio-economic profile coupled with a material decrease in the direct debt burden - Material growth in unencumbered cash reserves WHAT COULD MAKE THE RATING GO DOWN - Weakening of the district's tax base or significant declines in enrollment

2 - Protracted declines in reserve and/or liquidity levels STRENGTHS - Stable financial operations within the parameters of the state education funding structure - Trend of growing enrollment CHALLENGES - Elevated debt burden partially mitigated by state support - Moderately-sized tax base with below average socioeconomic indicators - Flat state aid revenues over the next two years despite growth in enrollment RECENT DEVELOPMENTS Recent developments are incorporated in the Detailed Rating Rationale. DETAILED RATING RATIONALE ECONOMY AND TAX BASE: MODERATELY-SIZED TAX BASE WITH ENROLLMENT GROWTH The district's tax base is expected to experience moderate growth due to the presence of available land and the stability of the district's major employers. The district covers 426 square miles in southwestern Kansas. The district serves portions of two counties, Ford and Hodgeman, and includes Dodge City (NR), a regional center of commerce for surrounding areas. The district's moderately-sized $1.53 billion tax base is dominated by the beef processing industry, and has grown at an average annual rate of 2.5% since The district's two largest employers are Cargill, Incorporated (Long-term rated A2/stable outlook) and National Beef, which employ approximately 2,800 and 2,950, respectively. Management reports ongoing commercial and residential development, including a planned $50 million expansion at the Cargill plant. Reflecting the rural nature of the district's tax base, residential income indices track below state and national norms. Median family income tracked at 82% and 83% of state and national levels from 2006 to 2010, according to American Community Survey estimates. At 4.3% in July 2015, the multi-county unemployment rate was below the state (5.1%) and national (5.6%) rates for the same time period. Enrollment has increased at an annual average rate of 2.1%, reaching 6,873 students in fiscal The district expects enrollment trends to continue, as management estimates enrollment will increase by approximately 100 students per year over the next two to three years. FINANCIAL OPERATIONS AND RESERVES: ADEQUATE RESERVES; IMPROVED LIQUIDITY Moody's expects the district's financial position to remain adequate given conservative financial management and adequate reserve levels. Like all Kansas school districts, the district's ability to maintain reserves is limited by the state education funding structure, which reduces state aid by year-end unencumbered cash balances in a district's General Fund and requires the Supplemental General Fund (or Local Option Budget) balances be used to reduce property taxes. Due to the restrictions on cash reserves in the General and Supplemental General Funds, Kansas school districts generally keep reserves in other operating funds that do not offset against state aid. We consider all operating reserves in our assessment of financial health. Districts typically transfer the majority of year-end General Fund and LOB Fund balance to the Contingency Reserve, Special Education, and/or the Capital Outlay Funds. While Special Education Fund and Capital Outlay Fund balances cannot be transferred back to the General Fund or Supplemental General Fund, larger balances afford districts flexibility by allowing them to reduce future transfer amounts if necessary. Combined balances in the Contingency Reserve, Special Education, Capital Outlay Funds, and I&S Fund (debt service) equaled approximately $11.0 million, or 15.97% of Operating Funds (General Fund, Debt Service Fund, Supplemental General Fund, Capital Outlay Fund) revenues, at the end of fiscal Fiscal 2014 combined balances declined by approximately $1.2 million from the prior year, which officials attributed to a planned draw to fund needed facility improvements in response to decreased state funding. Unaudited results for fiscal 2015 indicate that the district improved the reserve balances and expects to close the year with a slight increase to $12.1 million in the operating funds. The large increase is credited to an increase in the Capital Outlay Fund, which had been set at 3.5 mills but was increased to the maximum 8 mills in fiscal District officials expect to utilize

3 the additional capital outlay funds when the construction projects begin and report utilizing the increased capital outlay funds in 2015 in relation to the current capital project. Future review will assess the district's ability to effectively utilize available funds while maintaining overall reserves in line with similarly rated peers. Liquidity The district's Contingency Reserve, the least restrictive of reserves held, totaled $5.4 million (7.9% of operating revenues) at the end of fiscal Unaudited fiscal 2015 results suggest an increase to $5.9 million in the contingency reserve fund. Total operating funds liquidity was $12.1 million at fiscal 2014 year-end. Future rating reviews will assess the district's ability to maintain its liquidity profile. ABOVE AVERAGE DEBT BURDEN; MITIGATED BY STATE SUPPORT We expect the district's above average debt burden to remain manageable due to state support for debt service and the district's lack of future borrowing plans. Inclusive of the current offering the district's direct debt burden of 6.6% of full value (10.3% including overlapping debt), consisting of general obligation and lease revenue obligations, is elevated. Favorably, the district benefits from state support to pay approximately 60% of total debt service costs on voted general obligation bonds. While the state support is not specifically pledged, its presence mitigates the burden on the local property tax base. Adjusting for state support the district's debt burden is a more manageable 2.63% of full value. Debt service costs were 10.8% of operating expenditures in fiscal Principal repayment is slow, with approximately 40.3% of debt repaid in ten years. Currently, Kansas school districts' annual allocation of state aid from the state's Capital Improvement Fund (CIF) is determined by applying its state aid percentage factor to the bond and interest fund payment obligation for that year. Moody's notes that as of March 2015, the CIF plan was replaced with a block grant system which freezes state aid at the fiscal 2015 level through fiscal 2017 and reduces CIF assistance for general obligation bonds approved at elections held on July 1, 2015 and thereafter. Favorably, the current issuance was approved prior to the July, 1 deadline as part of a $85.6 million bond election in June Debt Structure All of the district's debt structure is fixed rate and is structured to be amortized over the long-term from annual district revenues, with all debt scheduled to fully mature by Debt amortization is below average, with 40.3% of principal repaid within ten years. Debt-Related Derivatives The district has no exposure to debt-related derivatives. Pensions and OPEB The district participates in the Kansas Public Employees Retirement System (KPERS). The state covers the full cost of the district's pension costs. Therefore, the district has no adjusted net pension liability under Moody's methodology. MANAGEMENT AND GOVERNANCE Kansas school districts have an institutional framework score of "A" or moderate. School district revenues are primarily determined by the state funding formula. The state has implemented a block grant funding system for fiscal years 2016 and 2017 which freezes operational state aid to the amount received in fiscal 2015, irrespective of enrollment growth. School districts have the ability to levy some property taxes to support operations without voter approval and can levy additional property taxes with voter approval. Districts also have some expenditure flexibility as employee contracts in Kansas are generally not subject to collective bargaining. KEY STATISTICS - Full value, 2015: $1.53 billion - Full value per capita, 2014: $49,466 - Median family income: 83% of U.S. - Available fund balance, FY 2014: 15.97% of operating revenues

4 - 5-year change in fund balance: -1.08% of operating revenues - Net cash, FY 2014: 15.97% of operating revenues - 5-year change in net cash: -1.08% of operating revenues - Institutional framework: A - 5-year average of operating revenues / expenditures: 1.00x - Net direct debt burden % of full value: 6.58% - Net direct debt burden / operating revenues: 1.5x - 3-year average Moody's adjusted net pension liability % of full value: 0.00% - 3-year average Moody's adjusted net pension liability / operating revenues: 0.00x OBLIGOR PROFILE Unified School District No. 443, Ford County, Kansas (Dodge City) is located in southwest Kansas, approximately 160 miles west of Wichita, KS (Aa1/stable). The district encompasses approximately 425 square miles serving an estimated population of 33,925 and has a current enrollment of 6,873. LEGAL SECURITY The bonds are secured by an unlimited ad valorem tax on all taxable property within the district. USE OF PROCEEDS Proceeds from the GO Series 2015-A bonds will finance construction and expansion on the district's school facilities. The proceeds from the GO Refunding bonds Series 2015-B will refund certain maturities of the 2008 bonds for a present value savings of 3.8% with no extension of maturity. PRINCIPAL METHODOLOGY The principal methodology used in this rating was US Local Government General Obligation Debt published in January The additional methodology used in rating the lease rental debt was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in December Please see the Credit Policy page on for a copy of these methodologies. 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 Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. Please see 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 for additional regulatory disclosures for each credit rating.

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