U.S. PUBLIC FINANCE

CREDIT OPINION3 October 2016

New Issue

Contacts

Heather Correia 214-979-6868Associate Analystheather.correia@moodys.com

Roger S Brown 214-979-6840VP-Senior Analyst/Managerroger.brown@moodys.com

Central New Mexico Community College,NMNew Issue - Moody's Assigns Aa1 to Central New Mexico CC,NM's $42M in GOLT Bonds, Ser. 2016

Summary Rating RationaleMoody's Investors Service has assigned a Aa1 to Central New Mexico Community College(CNM), NM's $42 million General Obligation Limited Tax Bonds, Series 2016. Concurrently,Moody's maintains the Aa1 rating on $63.3 million in outstanding parity obligations.

The Aa1 rating is reflective of the college's large and diverse tax base, which is locatedin Albuquerque, the state's economic hub; adequate financial position despite threeyears of operating deficits; modest debt burden with plans for additional borrowing; and,approximately stable enrollment.

Credit Strengths

» Large and diverse tax base encompassing Albuquerque

» Largest higher education institution in the state (in terms of enrollment)

» Modest debt burden

Credit Challenges

» Operating deficits reported in fiscal 2014, fiscal 2015 & fiscal 2016 (unaudited)

» Possible near-term reductions in state funding

Rating OutlookMoody's does not generally assign outlooks to local government credits with this amount ofdebt outstanding.

Factors that Could Lead to an Upgrade

» Significant tax base expansion

» Trend of positive operations that materially increase reserves

Factors that Could Lead to a Downgrade

» Deterioration of cash reserves

» Continued reduction of net asset position

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This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 3 October 2016 Central New Mexico Community College, NM: New Issue - Moody's Assigns Aa1 to Central New Mexico CC, NM's $42M in GOLT Bonds, Ser. 2016

» Sustained assessed value contractions

Key Indicators

Exhibit 1

*Fund Balance at a % of Revenues is calculated using the district's unrestricted net asset position. Fiscal 2015 reflects recognition of a $151 million net pension liability as part of GASB 68.Source: CNM audits; Moody's Investors Service

Detailed Rating ConsiderationsEconomy and Tax Base: Large Tax Base in North-Central New MexicoCentral New Mexico Community College's service area includes Bernalillo County (Aaa/Stable outlook) and a portion of SandovalCounty (Aa2/Rating Under Review for Downgrade) and nine separate campuses. The local economy is bolstered by a combinationof industries including health, higher education, industrial, manufacturing, military and tourism. Significant institutional presence,including the University of New Mexico (Aa2/Rating Under Review for Downgrade) and Kirtland Air Force Base, supports economicstability. Large private sector employers in the two counties include Sandia National Laboratories, Intel Corporation (A1/Stable), andPresbyterian Hospital. The college's service area economy experienced contractions during the recession, but since fiscal 2013, assessedvalue (AV) has expanded steadily, albeit modestly, to $17.5 billion (full value (FV) of $52.5 billion) in fiscal 2016. Preliminary fiscal 2017AV is $17.8 billion (FV of $54 billion), or a 2.8% increase over prior year. Property within Bernalillo County accounts for 85.5% of theassessed values and the remaining 14.5% is within Sandoval County. We expect the economy to remain stable given the diverse natureof the region and its significant institutional presence.

The district's large, diverse economy is supported by average wealth indices. Using Bernalillo Co. as a proxy, unemployment levels asof July 2016 were 6.2%, favorable compared to the state's 7.1%, but slightly elevated compared to the nation's 5.1%. Median familyincome was 93.1% of the US, per the 2014 American Community Survey. The college is the largest in the state with 2015 full timeequivalent (FTE) enrollment of approximately 29,100 students. 2016 enrollment through September was 24,900. Given the inverserelationship between enrollment levels and the college's regional economy, enrollment has declined by 9.3% since 2011 but hasstabilized since 2014 with enrollment to remain around 29,000 in the near-term. The college remains competitive with programofferings that reflect employment opportunities in the area, dual course offerings for high school students and a variety of certificateprograms in 80 disciplines, in addition to options for online learning and workforce training.

Financial Operations and Reserves: Stable Financial Position; Cuts to State Aid ExpectedThe college's financial position will likely remain satisfactory over the near-term given conservative budgeting practices. Fiscal 2015reported a $1.5 million decline in net assets, due to a decline in student enrollment, translating to a softening in tuition revenues,coupled with an uptick in instructional costs. In addition, CNM implemented GASB 68, resulting in recognition of a $151 millionpension liability, further reducing the college's net assets to $97.4 million from $244.5 million.

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3 3 October 2016 Central New Mexico Community College, NM: New Issue - Moody's Assigns Aa1 to Central New Mexico CC, NM's $42M in GOLT Bonds, Ser. 2016

Although the college's financial statements are presented on a full accrual basis, in practice, the college relies on fund accounting, withits “current fund” being the primary operating fund. Prior to fiscal 2013, the college maintained between $26 million and $28 millionin its Current Fund, translating to around 23% in total current revenues. The college made a sizeable investment in capital in fiscal2014, reducing the Current Fund to $19.7 million, or 15.6% of revenues. Fiscal 2015 saw another decline to $18.4 million, or 13.9% ofrevenues. Management has a policy to maintain between 12% to 18% of operating expenditures in Current Fund Balance.

Fiscal 2016 unaudited financial statements reported a $7 million decline in net assets to $90.3 million. Management attributes thisto increased pension expenses. Additionally, CNM was subject to a 1.9% state funding cut; however, based on the funding formulawith dollars awarded, in part, based on graduation rates, the college realized a modest increase in total state aid. Positively, the collegeeliminated 125 positions through a retirement incentive program and attrition. Consequently, the district's Current Fund increased to$25.3 million or 18.8% of revenues. Management made a conscious effort to increase Current Fund balance given anticipated statefunding cuts in fiscal 2017.

The fiscal 2017 budget anticipates a 10% reduction in state funding. With the decline in oil and gas severance taxes, the State of NewMexico (Aaa/Rating Under Review for Downgrade) is facing significant budgetary challenges. A Special Session began on September30, 2016 to discuss how to close the budgetary gap. CNM is prepared to utilize approximately $5.5 million in fund balance, reducingthe Current Fund to $19.8 million, or 14.5% of budgeted revenues. Additionally, over the course of the year, the district anticipateseliminating another 100 positions through attrition, vacancies and retirement. Although the college has the ability to make mid-yearstaffing adjustments, they have no intention of doing so at this time.

The district's revenue streams are diverse, with approximately 30% derived from local sources, 30% from state sources and theremaining 40% from tuition, fees, grants and sales. The district's operating mill levy is $3.00/$1,000 AV, with a statutory cap of$5.00/$1,000 AV. No adjustments in the mill levy are expected. Since fiscal 2013, management has made annual adjustments to itstuition rates. For fiscal 2017, full-time resident tuition is $624 per semester and full-time non-resident tuition is $3,312 per semester.Management is focused on cultivating additional revenue streams and has developed workforce training programs where professionalscan fulfill continuing education requirements. Other revenues represent around 3% of the fiscal 2017 budget.

LIQUIDITY

Fiscal 2015 unrestricted cash and investments totaled $45.6 million, or 26.3% of operating revenues. This is a marked decline fromfiscal 2010's $80.3 million, or 50.2% of operating revenues, which is attributed to capital and facility maintenance. Positively,unaudited fiscal 2016 unrestricted cash and investments were $53.1 million, or 30.6% of fiscal 2015 operating revenues.

Debt and Pensions: Modest Debt Burden; Plans to Issue in the Near-termAt 0.2% of fiscal 2016 full value, the district's debt burden is modest, and will likely remain as such over the mid-term given thoughtfuldebt plans and average principal retirement. Relative to the tax base, the district's debt burden is modest, and remains well belowconstitutional limits of 3% of AV, or $534.2 million. Management anticipates exhausting remaining 2016 authorization ($42 million) in2017 or 2018. Voters approved a debt service levy increase to $1.00/$1,000 AV from $0.55/$1,000 AV, which went into effect in fiscal2017. Officials expect the new levy to be sufficient to service debt over the long-term.

DEBT STRUCTURE

Post-sale, the college has five series of GOLT bonds outstanding. All debt is fixed rate and retires by fiscal 2031. Principal amortizationis average, with 83.6% retired in ten years.

DEBT-RELATED DERIVATIVES

The district is not party to any interest rate swaps or other derivative agreements.

PENSIONS AND OPEB

The district has an average employee pension burden, based on unfunded liabilities for its share of the Educational Retirement Board(ERB), a cost sharing plan administered by the state. Moody's fiscal 2015 adjusted net pension liability (ANPL) for the district, under ourmethodology for adjusting reported pension data, is $367.7 million, or a somewhat elevated 2.12 times operating revenues. The three-year average of the district's ANPL to operating revenues is 2.06 times, while the three-year average of ANPL to FV is below average at0.66%. Moody's ANPL reflects certain adjustments we make to improve comparability of reported pension liabilities.

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4 3 October 2016 Central New Mexico Community College, NM: New Issue - Moody's Assigns Aa1 to Central New Mexico CC, NM's $42M in GOLT Bonds, Ser. 2016

The adjustments are not intended to replace the district’s reported liability information, but to improve comparability with otherrated entities. The New Mexico pension plan funding structure experienced several changes with the signing of SB 115, including thereduction of a cost-of-living adjustment (COLA) and increases in employee contributions. The legislation will maintain the fundingchanges until the plan has reached 100% funding, which is estimated to be achieved in 2043. We believe the funding changes adoptedin SB 115 will limit budgetary pressure on the district related to future pension costs. For more information on Moody's insights onemployee pensions and the related credit impact on companies, government, and other entities across the globe, please visit Moody'son Pensions at www.moodys.com/pensions.

Management and GovernanceCNM is governed by a seven member board that serve four-year terms. Administration is stable, with minimal turnover. The college isaccredited by the Higher Learning Commission of the North Central Association of Colleges and Schools. CNM received reaffirmationof accredition through 2023.

New Mexico community college districts (CCDs) have an institutional framework score of ‘Aa,’ or strong. Community college districtsmainly rely on state appropriations, property taxes, and a smaller amount of tuition revenues that can be raised to enhance revenues.These sources of revenue remain moderately predictable. Expenditures consist of salaries and special programs that can be moderatelyadjusted if enrollment declines or programs do not generate demand. Expenditures are considered highly predictably given studentenrollment levels.

Legal SecurityThe bonds are secured by ad valorem taxes levied against all taxable property within the district, in an amount not to exceed five mills;however this limit may be exceeded if the valuation of property within the district declines to a level lower than the valuation of suchproperty in the year in which the bonds were issued.

Use of ProceedsProceeds from the Series 2016 bonds will be used for various capital improvements and renovations across the district, with the largestprojects being the “Joint Use High School and North Building Demolition” and “J Building Renovation - Phase II.”

Obligor ProfileThe college is a political subdivision of the State of New Mexico organized for the purpose of operating and maintaining a programof postsecondary education which provides coursework leading to certificates and associate degrees. The college’s taxing districtencompasses substantially all of Bernalillo County including the municipalities of Albuquerque, Tijeras and Los Ranchos de Albuquerqueand most unincorporated areas, and in Sandoval County, the municipalities of Rio Rancho and Corrales. Total headcount for 2015 was29,100.

MethodologyThe principal methodology used in this rating was US Local Government General Obligation Debt published in January 2014. Please seethe Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Ratings

Exhibit 2

Central New Mexico Community College, NMIssue RatingGeneral Obligation (Limited Tax) Bonds, Series2016

Aa1

Rating Type Underlying LTSale Amount $42,000,000Expected Sale Date 10/10/2016Rating Description General Obligation

Limited TaxSource: Moody's Investors Service

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5 3 October 2016 Central New Mexico Community College, NM: New Issue - Moody's Assigns Aa1 to Central New Mexico CC, NM's $42M in GOLT Bonds, Ser. 2016

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