MOODY'S ASSIGNS Aaa RATING TO THE CITY OF LENEXA'S (KS) $14.2 MILLION GENERAL OBLIGATION BONDS, SERIES 2010B AND $22.1 MILLION GENERAL OBLIGATION REFUNDING BONDS, SERIES 2010C

Aaa RATING APPLIES TO $131.9 MILLION OF OUTSTANDING DEBT, INCLUDING CURRENT ISSUES

Municipality
KS

Moody's Rating
Issue Rating

General Obligation Bonds, Series 2010B Aaa
Sale Amount $14,165,000
Expected Sale Date 07/20/10
Rating Description General Obligation

General Obligation Refunding Bonds, Series 2010C Aaa
Sale Amount $22,100,000
Expected Sale Date 07/20/10
Rating Description General Obligation

NEW YORK, Jul 16, 2010 -- Moody's Investors Service has assigned a Aaa rating to the City of Lenexa's (KS) $14.2 million General Obligation Bonds, Series 2010B and the $22.1 million General Obligation Refunding Bonds, Series 2010C. Concurrently, Moody's has affirmed the Aaa rating on the city's outstanding long term general obligation debt, affecting $95.7 million post-sale. Proceeds of the Series 2010B will be used to finance various street and storm drainage improvements and related projects as well as retire the City's 2008C temporary notes. Proceeds from Series 2010C will refund the General Obligation Refunding and Improvement Bonds, Series 2003A. The Series 2010B and 2010C Bonds are secured by the city's general obligation unlimited tax pledge, but are expected to be paid with special assessments. Assignment and affirmation of the Aaa rating is based on the city's favorable location in Johnson County (rated Aaa); above average income levels; sound financial operations; and manageable debt levels.

JOHNSON COUNTY COMMUNITY BENEFITS FROM ABOVE AVERAGE INCOME LEVELS; TAX BASE CHALLENGED BY HOUSING MARKET SLOWDOWN AND PHASE OUT OF MACHINERY AND EQUIPMENT FROM TAX ROLL

Despite a recent slowdown in new residential construction, we expect the city's large tax base to continue to grow due to its favorable location within the Kansas City (Aa2/ stable outlook) metropolitan area and the presence of available land for future development. Lenexa's sizeable $5.5 billion tax base experienced a significant drop of 16% in full valuation from the prior year though the change in the taxable assessed value was a more moderate 4% decline. Officials report that the city's assessed value is projected to decline 10% for fiscal 2011 primarily attributed to the depreciation in real property (residential and commercial) values and the tax roll phase out of machinery and equipment. Notably, the exemption of machinery and equipment from ad valorem property taxes has adversely affected personal property with values declining 63% since inception in 2006. Although new housing starts have slowed significantly in recent years (37 new residential building permits were issued in 2009, compared to a peak of 374 in 2004), commercial development and expansions have buoyed the city's growth. Current development projects include the City Center North project (a residential development project), a $19 million new office building and the completed Lifetime Fitness facility. Officials report construction at the City Center East project (a mixed use development that includes office, retail, and condo space) is partially completed with one building 77% leased. The second building within this development has stalled due to the developer's financing. Sprint Nextel Corporation (Ba2) is the city's largest taxpayer (accounting for 3.3% of assessed valuation) and a major regional employer.

The city's income levels exceed state and national medians, with PCI and MFI at 147.3% and 153.8%, respectively. The city of Lenexa unemployment rate of 6.5% (April 2010) compares favorably to that of the state and nation (6.3% and 9.5%, respectively).

FINANCIAL OPERATIONS EXPECTED TO REMAIN SOUND
We expect the city's financial operations will remain sound due to the presence of ample reserves and formal fiscal policies. The city's reserves have increased substantially to over $20 million in fiscal 2009 (a healthy 38.2% of General Fund revenues) from $6.8 million in fiscal 2002 (an adequate 19% of General Fund revenues) due largely to conservative management of annual expenditures. At the close of fiscal 2007, in which the city recorded a $1.2 million General Fund operating surplus due in part to favorable sales tax and franchise fee revenues, reserves stood at $21.3 million, or an ample 41% of General Fund revenues. In fiscal 2008 the city's reserves declined by $1.2 million due to the use of funds on hand which were combined with proceeds from a land sale, to retire debt and fund a transfer to the Risk Management Fund. This brought reserves to $20.1 million, or a still sound 37.5% of revenues, well above the city's formal policy calling for a range equal to 17% to 25% annual appropriations. Favorably, despite sales tax collections falling short of budgeted expectations in fiscal 2009, audited results show a modest surplus of $203,000. The surplus resulted from mid-year expenditure adjustments that included the delay of transfers to capital projects. Management projects balanced operations for fiscal 2010 and do not expect to draw on the General Fund balance to meet budgeted obligations. The city has sound formal reserve policies for all city funds ensuring suitable liquidity and the maintenance of working capital. We believe management's commitment to balanced operations is key to the Aaa rating level. Should reserves significantly deteriorate below current levels, the city's credit quality could come under pressure.

Like many Kansas municipalities, sales taxes are one of the city's largest revenue sources, accounting for 27% of fiscal 2009 General Fund revenues. Sales tax collections increased on average by 6.2% per year between fiscals 2005 and 2009. In 2009 the city increased the sales tax rate by 0.375% to 1.5% in order to generate revenues for road and park maintenance and civic amenities. As a result, the amount collected increased 13% over the prior year yet still fell short of the budgeted amount by 13%. Projections for fiscal 2010 collections were held flat from the actual 2009 receipts.

MANAGEABLE DEBT LEVELS WITH AVERAGE PRINCIPAL AMORTIZATION
We believe the city's debt levels will remain manageable due to continued tax base and population growth as well as prudent long-term capital planning. At 2.4% and 5.0%, respectively, the city's direct and overall debt burdens are both above median values for cities nationwide. The rate of principal amortization is sound, with 77.8% of all long term general obligation debt retired in ten years. The city issues debt frequently (generally twice a year). Future debt plans for the next five years total approximately $74 million. Of this amount, $32 million will fund various capital projects (primarily road improvements), $23 million will finance storm water utility projects and the remainder will be for special benefit districts.

KEY STATISTICS
2000 census population: 40,238 (an 18% increase from 1990)
2009 Estimated population: 47,996
2009 Full Value: $5.5 billion
Estimated full value per capita: $115,032
1999 per capita income: $30,212 (140% of US)
1999 median family income: $76,321 (153% of US)
2000 median home value: $156,800 (131% of US)
Johnson County unemployment rate (April 2010): 5.8%
Fiscal 2009 General Fund balance : $20.3 million (38.2% of General Fund revenues)
Direct debt burden: 2.4%
Overall debt burden: 5.0%
Principal Amortization (10 years): 77.8%
Post-sale general obligation debt: $131.9 million

PRINCIPAL METHODOLOGY AND LAST RATING ACTION
The principal methodology used in assigning the rating was General Obligation Bonds Issued by U.S. Local Governments, published in October 2009, and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

The last rating action for the city's long-term GOULT rating was on August 4, 2009, when a rating of Aa1 was assigned to the General Obligation Refunding Bonds, Series 2009B. That rating was subsequently recalibrated to Aaa on May 1, 2010.

Analysts
Tatiana Killen
Analyst
Public Finance Group
Moody's Investors Service

Soo Yun Chun
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts
Journalists: (212) 553-0376
Research Clients: (212) 553-1653

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