Rating Action: Moody’s assigns UND Aa2 & ENH Aa2 to St. Paul ISD 625, MN’s GO bondsGlobal Credit Research – 15 Feb 2022New York, February 15, 2022 — Moody’s Investors Service has assigned an underlying Aa2 rating and enhanced Aa2 rating to St. Paul Independent School District 625, MN’s $15 million General Obligation School Building Bonds, Series 2022A, $21.6 million General Obligation Facilities Maintenance Bonds, Series 2022B and the $10.1 million General Obligation School Building Refunding Bonds, Series 2022C. Moody’s maintains the district’s Aa2 issuer rating, and the Aa2 rating on the district’s outstanding general obligation unlimited tax (GOULT) debt. The issuer rating reflects the district’s ability to repay debt and debt-like obligations without consideration of any pledge, security, or structural features. Following the upcoming sale, the district will have about $291 million of GOULT debt, $260 million in full-term COPs and around $21 million in annual appropriation COPs. The outlook remains stable.RATINGS RATIONALEThe Aa2 issuer rating reflects the district’s robust economic base in St. Paul (Aa1 stable) that includes the state capital of Minnesota (Aa1 positive), below average resident income, with healthy wealth (full value per capita), trend of gradual enrollment declines and a stable financial operations with solid reserves. The rating also reflects the district’s above average leverage likely to grow and relatively low fixed costs.The Aa2 GOULT rating is equivalent to the Aa2 issuer rating because of the district’s full faith and credit pledge with authority to raise ad valorem property taxes unlimited as to rate or amount.The Aa2 enhanced rating on the GOULT bonds reflects the additional security provided by the State of Minnesota’s School District Credit Enhancement Program. The Aa2 enhanced programmatic rating is notched once from the State of Minnesota’s Aa1 general obligation unlimited tax (GOULT) rating. The enhanced rating reflects sound program mechanics and the State of Minnesota’s pledge of an unlimited appropriation from its General Fund should the district be unable to meet debt service requirements. The program’s mechanics include a provision for third party notification of pending deficiency. If the school district does not transfer funds necessary to pay debt to the paying agent at least three days prior to the payment due date, the state will appropriate the payment to the paying agent directly. Moody’s has received signed copies of the program applications for the Series 2022A Bonds, Series 2022B Bonds and Series 2022C Bonds.RATING OUTLOOKThe stable outlook reflects the district’s demonstrated ability to balance operations despite enrollment declines supported by strong management and the expectation that recent voter approved operating levies will support continued financial stability. The stable outlook also reflects our expectation that the district will continue to benefit from a robust regional economy.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Material and sustained growth in reserves- Moderation of leverage and fixed costs- Upward movement in State of Minnesota’s GO rating (enhanced)FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Weakening of reserves or unfavorable operating results- Increased fixed costs and leverage- Downward movement in the State of Minnesota’s GO rating (enhanced)- Weakening of the MSDCE Program mechanics (enhanced)LEGAL SECURITYThe general obligation unlimited tax (GOULT) bonds are backed by the district’s full faith and credit pledge and the authority to levy a dedicated property tax unlimited as to rate and amount. The bonds are additionally secured by statute.The GOULT bonds are additionally backed by the State of Minnesota’s School District Credit Enhancement Program which provides for an unlimited advance from the state’s general fund should the district be unable to meet debt service requirements.USE OF PROCEEDSThe Series 2022A GOULT bonds will finance various capital improvements at school facilities, including infrastructure upgrades, building remodeling and renovations, security improvements, and energy efficiency improvements.The Series 2022B GOULT bonds will finance various deferred maintenance projects at existing facilities in accordance with the district’s 10 year facilities maintenance plan.The Series 2022C GOULT bonds will refund the district’s outstanding General Obligation School Building Bonds, Series 2014A for interest cost savings. The Series 2014A bonds were originally issued to finance various capital improvements at school facilities and equipping of facilities.PROFILESt. Paul ISD 625 is nearly coterminous with the City of St. Paul and is located in Ramsey County (Aaa stable). The district encompasses about 55 square miles and serves a population of more than 300,000 residents. The district has over 3,600 licensed employees and around 2,500 unlicensed employees and provides educational services to over 34,000 students in grades pre-kindergarten through twelve.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 ratings 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. 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. 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