s&p ratings report 170m pedfa bonds

8/13/2019 S&P Ratings Report 170M PEDFA Bonds

1/5


2/5

Summary:

Pennsylvania Economic Development FinancingAuthority

Dauphin County, Pennsylvania; GeneralObligation

Credit Profile

US$98.998 mil jr gtd parking rev bnds (Dauphin Cnty) (Capitol Region Parking Sys) ser 2013B 1-4 due 01/01/2054

Long Term Rating AA/Stable New

US$70.999 mil jr insured/gtd parking rev bnds (Dauphin Cnty) (Capitol Region Parking Sys) ser 2013C 1-3 due 01/01/2054

Long Term Rating AA/Stable New

Rationale

Standard & Poor's Ratings Services assigned its 'AA' long-term rating and stable outlook to Pennsylvania Economic

Development Financing Authority's (PEDFA's) parking system revenue bonds (Capitol Region Parking System) series

2013B junior guaranteed parking revenue bonds and 2013C junior insured/guaranteed parking revenue bonds. At the

same time, Standard & Poor's affirmed its 'AA' rating, with a stable outlook, on Dauphin County's general obligation

(GO) bonds outstanding.

The rating is based on Dauphin County, Pa.'s GO pledge. The series B and C bonds are junior-lien bonds, payable from

parking revenues after operating expenses and series A debt service. The series A bonds have a senior lien and will be

paid from parking revenues, including a parking lease with the commonwealth's department of general services (DGS)

for more than 50% of off-street spaces within the parking system, which consists of 7,694 off-street spaces and 1,260

on-street spaces (for more information on the series A bonds, please refer to the analysis published Dec. 3, 2013, on

RatingsDirect). Pursuant to the series 2013B guaranty agreement, Dauphin County will pledge its full faith, credit, and

taxing power for the budgeting and appropriation and punctual payment of debt service on the series B bonds.

Pursuant to the series 2013C guaranty agreement, in the event that Assured Guaranty Municipal Corp. (AGM) fails to

make debt service payments under the terms of the bond insurance policy, the county is pledging its full faith, credit,

and taxing power for the budgeting, appropriation, and payment of debt service.

The trust estate for the bonds consists of parking revenues excluding gross receipts taxes payable to Harrisburg and

parking lease payments from the DGS; a first-priority lien on the open-end leasehold mortgage, security agreement,

fixture filing, and assignment of leases and rents; and the authority's rights under the asset transfer agreement, the

lease, the DGS parking lease, and the PEDFA intergovernmental cooperation and servicing agreements. The

authority's annual rate covenant consists of two tests. One is that parking system revenue is sufficient to cover current

expenses, debt service on the bonds, replenishment of debt service reserve funds (if any), asset manager performance

and operator performance fees, city payments and additional rent, sums payable to the authority, and amounts needed

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT DECEMBER 3, 2013 2

1223342 | 301020913


3/5

to maintain the capital reserve requirement. The other part of the rate covenant is that revenues net of current

expenses are not less than 125% of the debt service on all bonds (series A, B, and C bonds). A rate covenant violation

may not be an event of default under the indenture, if certain remedial procedures are followed. The additional bonds

test for the series A bonds requires that PEDFA demonstrate 3.0x debt service coverage (based on gross revenues) of

the current and proposed senior bonds. Any additional debt for series A, B, or C bonds is subject to county and AGM

consent.

Debt service on the series B and C junior-lien bonds escalates from approximately $6.6 million in 2015 to $11.8 million

in 2044 (year 30) after which the series A bonds are retired. From 2045 (year 31) onward to final maturity in 2054 (year

40), debt service is level at approximately $24.1 million, assuming mandatory sinking fund payments. The full debt

service payment represents 6% of the county's adjusted 2012 governmental fund expenditures, escalated at 2% per

year.

The PEDFA bonds are being issued concurrently with Lancaster County Solid Waste Management Authority's

(LCSWMA) series 2013A and B bonds as part of the "Harrisburg Strong" recovery plan approved by the

commonwealth legislature (and filed by the office of the receiver created by the commonwealth legislature) to set the

city on a sustainable fiscal path. We understand that the two transactions should generate approximately $400 million

in net proceeds, which together with various concessions, will defease all of the Harrisburg Authority's Resource

Recovery Facility's (RRF) existing debt at closing. Harrisburg's leveraging of the RRF and its required debt service

payments were primary drivers of its fiscal stress. The city stopped making payment on the RRF bonds, which resulted

in Dauphin County stepping in with its second guaranty on the series 2003D and E bonds for which it has paid more

than $25 million to date, with total principal of $105 million still outstanding. Dauphin County also provided a working

capital loan of $34.685 million by issuing a bond anticipation note through PNC Bank to avoid a default under the 2007

indenture. For more information on the LCSWMA bonds, please refer to the analyses published Oct. 29, 2013 and Nov.

28, 2013, respectively, on RatingsDirect.

In addition to defeasing the existing RRF debt, the transaction will repay the county's working capital note and provide

reimbursement of $8.5 million for guaranty payments made in 2013. In the longer term, residual parking revenues after

the series B and C bonds are repaid will reimburse the county $20 million for guaranty payments made and other

expenses incurred; however, this is unlikely to occur until approximately year 35 of the transaction.

The 'AA' GO rating on Dauphin County reflects our assessment of the following credit factors:

Strong local economy based on the broad and diverse Harrisburg metropolitan statistical area, which serves as the

state capital and county seat;

Strong budgetary flexibility albeit with the potential for drawdowns over the next two years;

Adequate budgetary performance in fiscal 2012;

Very strong liquidity, with strong access to external liquidity;

Very weak debt and contingent liability profile; and

Strong management based on existing policies.

For more information on the GO rating, please refer to the analysis published Nov. 28, 2013, on RatingsDirect.


1223342 | 301020913

Summary: Pennsylvania Economic Development Financing Authority Dauphin County, Pennsylvania; GeneralObligation


4/5

Outlook

The stable outlook reflects our view of Dauphin County's stable local economy and proven willingness to support its

debt and contingency obligations. We believe that the proposed PEDFA and LCSWMA transactions will reduce the

county's liquidity risk and provide budgetary relief in the near term; however, longer term contingent liability riskremains if parking revenues are insufficient to make debt service payments or if flow control legislation is not

extended. It is our view that the county will continue to take the actions necessary to reduce these risks. While we do

not anticipate raising the rating within the two-year outlook horizon, we could lower the rating if the county fails to

maintain available reserves at target levels and restore structural balance. We believe that a high degree of budgetary

flexibility is necessary for the county, given its exposure to contingent liabilities.

Related Criteria And Research

Related Criteria

USPF Criteria: Local Government GO Ratings Methodology And Assumptions, Sept. 12, 2013

USPF Criteria: Contingent Liquidity Risks, March 5, 2012

Related Research

S&P Public Finance Local GO Criteria: How We Adjust Data For Analytic Consistency, Sept. 12, 2013

Ratings Detail (As Of December 3, 2013)

Dauphin Cnty GO

Long Term Rating AA/Stable Affirmed

Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com. All ratings

affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use

the Ratings search box located in the left column.


1223342 | 301020913

Summary: Pennsylvania Economic Development Financing Authority Dauphin County, Pennsylvania; GeneralObligation


5/5

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P

reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites,

www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com

(subscription) and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information

about our ratings fees is available at www.standardandpoors.com/usratingsfees.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective

activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established

policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain

regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P

Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any

damage alleged to have been suffered on account thereof.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and

not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase,

hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to

update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment

and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does

not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be

reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part

thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval

system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be

used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or

agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not

responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for

the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL

EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR

A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING

WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no

event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential

damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused bynegligence) in connection with any use of the Content even if advised of the possibility of such damages.

Copyright 2013 by Standard & Poor's Financial Services LLC. All rights reserved.


1223342 | 301020913

s&p ratings report 170m pedfa bonds

Documents