Rating Action: Moody’s Ratings upgrades Kennesaw, GA’s Issuer and GOULT ratings to Aa1 from Aa2

Kennesaw, GA (June 21, 2024) — Moody’s Rating’s (Moody’s) has upgraded the City of Kennesaw’s issuer rating to Aa1 from Aa2. Concurrently, Moody’s has upgraded the rating on the City’s general obligation unlimited tax (GOULT) revenue bonds to Aa1 from Aa2. The positive outlook has been removed. The City had approximately $11 million of debt outstanding at the end of fiscal 2023.

“I am proud of our city’s financial improvements and recent bond rating upgrades by Moody’s—three upgrades in three years,” says City Manager Dr. Jeff Drobney. “In 2015, we relied on a $4 million annual TAN and held an A1 bond rating from 2014 to 2022. With improved finances, economic development, increased reserves through conservative budgeting and the elimination of the annual TAN, our rating improved to Aa3 in 2022 and Aa2 last year. Recently, Moody’s upgraded us to Aa1, citing surplus operations, a healthy reserve and strong management. This achievement reflects the dedication of our staff and Council.”

The upgrade reflects the City’s trend of strong financial operations and growing tax base that has led to improved wealth levels.

RATINGS RATIONALE
The Aa1 issuer rating reflects the City’s ample financial metrics, favorable location within the growing Atlanta (Aa1 stable) metropolitan area and maintenance of low long-term liabilities. We expect the City’s financial position to remain strong driven by its strong revenue performance and prudent budget management. The City benefits from robust sales tax revenues as well as multiple commercial projects in the pipeline, which will increase the City’s property tax revenues. The City’s low long-term liabilities at only 60% of revenue and fixed cost at 3.6% of revenue are among the lowest in Georgia, which support the City’s credit rating.

The Aa1 rating on the GOULT revenue bonds is placed at the same level as the issuer rating to reflect the City’s absolute and unconditional pledge, via an intergovernmental agreement with the issuing agency, to levy an unlimited ad valorem tax on all taxable property within the City limits for repayment of the bonds.

RATING OUTLOOK
Moody’s does not assign outlooks to local government credits within this amount of debt outstanding.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

  • Continued economic growth that bolsters resident income and full value per capita
  • Maintenance of fund balance in excess of 50% as the City manages recent tax base growth and growing expenditures

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

  • Trend of operating deficits and/or material reduction in reserves that brings available fund balance ratio below 30%
  • Material increase in long-term liabilities ratio and/or fixed-costs ratio

LEGAL SECURITY
The GOULT revenue bonds, issued through the Kennesaw Urban Redevelopment Agency, are special limited obligations of the agency payable solely from a pledge of payments to be made by the City of Kennesaw pursuant to an intergovernmental agreement. The City’s obligation to make payments is absolute and unconditional, and the City has agreed to levy an unlimited annual ad valorem tax on all taxable property located within the corporate limits of the City at such rates as may be necessary to cover principal and interest payments on the bonds.

PROFILE
The City of Kennesaw is located in Cobb County (Aaa stable). The City provides routine municipal services that include public safety, parks and recreation, public works, solid waste, stormwater, housing and development and other general governmental functions.

METHODOLOGY
The principal methodology used in these ratings was US Cities and Counties Methodology published in November 2022 and available at https://ratings.moodys.com/rmc-documents/386953. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY CLOSURES
For 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 on https://ratings.moodys.com/rating-definitions.

For ratings issued on 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 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 assurance 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 issuer/deal page for the respective issuer on https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see https://ratings.moodys.com 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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.