28.06.2012 23:13
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Carmel (City of) IN -- Moody's downgrades to A2 from Aa2 the rating on the City of Carmel's (IN) County Option Income Tax secured debt outstanding

Downgrade affects $112 million of debt outstanding

New York, June 28, 2012 -- Moody's Investors Service has downgraded the rating on the City of Carmel's (IN) County Option Income Tax (COIT) secured debt to A2 from Aa2. The A2 rating applies to $112 million of outstanding debt.

SUMMARY RATING RATIONALE

The downgrade to the A2 rating on the City of Carmel's (IN) $112 million of outstanding COIT secured debt reflects Moody's revised analytic approach for rating special tax supported debt, as detailed in the March 2012 US Public Finance Special Tax Methodology. The downgrade incorporates our assessments of the debt's legal provisions, which are adequate but have a weak additional bonds test, do not include non-impairment provisions by the State of Indiana (long term issuer rating Aaa/ stable outlook) to not reduce, alter, or change the city's distributive share of Hamilton County's (property tax backed debt rated Aaa/ negative outlook)COIT revenues and do not require monthly segregation of funds by a third party trustee, relatively modest maximum annual debt service coverage given historically volatile fluctuations in the amount of the city's distributive share of the pledged COIT revenues as well as a satisfactory debt service reserve, and the diversity and size of the affluent tax base upon which the COIT revenues are generated with include the City of Carmel as well as all of Hamilton County.

STRENGTHS

- Hamilton County's sizeable, diverse economy, with high wealth levels likely to support solid county income tax performance over time

- Sufficient debt service coverage provided by the pledge county option income tax revenues

CHALLENGES

- Lack of statutory pledge by the State of Indiana, Hamilton County, or the City of Carmel to not reduce, alter, amend, or change the city's distributive share of the county option income tax revenue stream pledged to the bonds

- Inability to increase the County Option Income Tax rate under the current law

- Historically volatile fluctuations in county option income tax revenues, which grew by 16.18% in fiscal 2009 but fell by 2.2% in fiscal 2010 and 18.4% in fiscal 2011

- Legal provisions do not require monthly set aside to a third party trustee or a general segregation of funds

WHAT COULD MAKE THE RATING GO UP

-Strengthening of legal provisions governing the flow of funds

-Sustained consistent growth of pledged revenues and related debt service coverage ratios

WHAT COULD MAKE THE RATING GO DOWN

-Declines in pledge revenues that materially weaken debt service coverage

-Additional borrowing secured by pledge revenues that significantly dilutes debt service coverage

-Weakening of overall economic base generating COIT revenues

The principal methodology used in this rating was US Public Finance Special Tax Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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 www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

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Tatiana Killen Analyst Public Finance Group Moody's FIS Domestic Sales Office - Chicago IL JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 The GMO - PFG Ratings News UNKNOWN Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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