Painesville (City of) OH -- Moody's assigns an A1 rating to the City of Painesville's (OH) $5.9 million Special Obligation Income Tax Bonds, Series 2012 (Street Improvement Project)

New York, November 21, 2012 --

Moody's Rating

Issue: Special Obligation Income Tax Bonds, Series 2012 (Street Improvement Project); Rating: A1; Sale Amount: $5,945,000; Expected Sale Date: 11/30/2012; Rating Description: Special Tax: Non - Sales/Non - Transportation

Opinion

Moody's Investors Service has assigned an A1 rating to the City of Painesville's (OH) $5.9 million Special Obligation Income Tax Bonds, Series 2012 (Street Improvement Project). Concurrently, we affirm the Aa3 rating on the city's $3.9 million general obligation long-term debt outstanding.

RATINGS RATIONALE

The bonds are secured by a pledge of income tax receipts collected by the city on all income earned within the city and income earned by city residents. Assignment of the A1 rating reflects the city's economic base, the nature of the pledge, the weak legal structure, and the sizable debt service coverage providing security for these bonds. The affirmation of the Aa3 rating on the city's outstanding general obligation debt reflects the city's moderately-sized taxbase that benefits from its role as the county seat for Lake County (rated Aa1); sound financial position with maintenance of solid reserve levels throughout the economic downturn; and above average debt burden reflecting debt expected to be retired through non-operating sources.

STRENGTHS

-Sound financial profile with solid reserve levels

-Relatively diverse income tax base that benefits from the stability of the Lake County government

-Slight growth in income tax collections for 2011 and year-to-date 2012-Significant income tax debt service coverage ratio of over 16 times

CHALLENGES

-Weak but still satisfactory legal structure with only 1.35 times additional bonds test, no debt service reserve fund, and no segregation of income tax receipts for bond payments

-Above average debt burden with some short-term exposure

-Moderately sized taxbase with limited socio-economic profile

WHAT COULD MAKE THE RATING GO -- UP:

-Significant growth and diversification of the taxbase

-Continued moderation of debt burden

WHAT COULD MAKE THE RATING GO -- DOWN:

-Material reductions in financial reserves

-Weakness in income tax collections and declines in overall coverage ratios

PRINCIPAL METHODOLOGIES USED

The principal methodologies used in this rating were General Obligation Bonds Issued by U.S. Local Governments published in October 2009, and 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.

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Jeffery YorgAsst Vice President - Analyst Public Finance Group Moody'sInvestors Service, Inc.100 N Riverside Plaza Suite 2220 Chicago, IL 60606 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Rachel Cortez Vice President - Senior Analyst 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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