Rating Action: Moody’s affirms Belle Vernon ASD, PA’s Baa1 issuer and GO ratings; assigns Baa1 GOLT and A2 (fiscal agent) ENH ratings to Series of 2021 BondsGlobal Credit Research – 23 Apr 2021New York, April 23, 2021 — Moody’s Investors Service has affirmed Belle Vernon Area School District, PA’s Baa1 issuer, general obligation unlimited tax (GOULT), and general obligation limited tax (GOLT) ratings, affecting approximately $28.4 million in rated debt outstanding. 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 has assigned a Baa1 GOLT underlying rating and an A2 enhanced rating to the district’s $7.4 million General Obligation Bonds, Series of 2021. Moody’s maintains the A3 enhanced ratings on the district’s outstanding GOULT and GOLT debt, aside from the Series of 2016 bonds that only carry an underlying rating.The pledge supporting the majority of the district’s rated general obligation debt, including the Series of 2021 bonds, is limited tax based on the limited ability of Pennsylvania school districts to increase their property tax levy above a preset index.RATINGS RATIONALEThe Baa1 issuer rating reflects the district’s improved but narrow financial position with limited financial flexibility. The rating also considers the moderately-sized tax base, average resident income and wealth, relatively stable enrollment trend, moderate long-term liabilities, and modest fixed costs.The Baa1 rating on the district’s GOULT debt is equivalent to its issuer rating based on its general obligation full faith and credit pledge as well as the ability to levy property taxes necessary to pay debt service, without limitation. The lack of distinction between the district’s issuer rating and the Baa1 rating on the district’s GOLT debt is based on the GOLT’s general obligation full faith and credit pledge. The GOLT rating also reflects Pennsylvania school districts’ ability to apply for exceptions to the cap on property tax increases in order to cover debt service and the Commonwealth’s history of granting such exceptions.The A2 and A3 enhanced ratings reflect our current assessment of the Pennsylvania School District Intercept Program, which provides that state aid will be allocated to bondholders in the event that the school district cannot meet its scheduled debt service payments.The A2 enhanced rating, which applies to the Series of 2021 bonds, reflects the presence of language in the bond documents that requires the paying agent to trigger the state aid intercept prior to default. The A3 enhanced rating, which applies to the remaining rated GOULT and GOLT debt aside from the Series of 2016 bonds, reflects that there is no language in the bond documents that requires the paying agent to trigger the state aid intercept prior to default. As of audited 2020 financial statements, Belle Vernon Area School District’s state aid revenue provides more than sum sufficient debt service coverage.RATING OUTLOOKThe stable outlook for the underlying rating reflects the expectation that the district’s financial position will remain narrow in the near term.The stable outlook on the enhanced ratings mirrors that of the Commonwealth of Pennsylvania (Aa3 stable).FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Material growth in reserves and liquidity- Strengthening of resident income and wealth- Improved enrollment trend- Significant decrease in total leverage- Improvement in the Commonwealth’s rating, resulting in an upgrade to the Pennsylvania School District Intercept Program rating (enhanced)FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Material decline in financial position- Deterioration of socioeconomic indicators or enrollment- Significant increase in long-term liabilities- Reduction in state aid below sum sufficient coverage (enhanced)- Decline in the Commonwealth’s rating, resulting in a downgrade to the Pennsylvania School District State Aid Intercept Program rating (enhanced)LEGAL SECURITYThe district’s GOULT debt is secured by its unlimited tax pledge, as the bonds were issued to refund debt that was originally incurred prior to the 2006 implementation of Act 1.The district’s GOLT debt, including the Series of 2021 bonds, is secured by its limited tax pledge, which is subject to the limits of Pennsylvania’s Act 1 “Taxpayer Relief Act.”The bonds are enhanced by the Pennsylvania School District Intercept Program.The intercept program is not a general obligation guarantee of the Commonwealth, and in fact, there have been times when the state has not distributed any aid to school districts, as was the case during the 2016 state budget impasse. However, with implementation of Act 85 in 2016, the state has ensured that intercept payments, for the benefit of bond debt service, will be made even in the absence of an appropriation budget.USE OF PROCEEDSProceeds from the issuance of the Series of 2021 bonds will be used to prepay the district’s outstanding energy services lease and refund the remaining portion of the Series A of 2013 bonds, with savings primarily realized in fiscal 2022.PROFILEBelle Vernon Area School District is located 25 miles southeast of Pittsburgh (A1 stable) and serves approximately 2,410 students in Washington Township, Fayette City, North Belle Vernon (Baa1 stable), Belle Vernon, and Rostraver Township. The district provides kindergarten through twelfth grade education, with facilities including two elementary schools, one middle school, and one high school.METHODOLOGY The principal methodology used in the underlying ratings was US K-12 Public School Districts Methodology published in January 2021 and available at http://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. 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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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