FOUNDATION HAS $14 MILLION OF RATED DEBT OUTSTANDING
Anne Arundel (County of) MD
NEW YORK, Sep 13, 2010 -- Moody's Investors Service has affirmed Anne Arundel Community
College Foundation's A2 long-term debt rating on $14 million of Series 2002
Economic Development Revenue Bonds (Anne Arundel Community College Project)
currently outstanding. The rating outlook is stable.
LEGAL SECURITY: Payments are a general obligation of the College's Foundation,
ultimately secured by operating lease payments made by the Community College.
Bond repayment is also secured by a cash funded debt service reserve fund equal
to maximum annual debt service and a mortgage lien on the Project. The lease is
not subject to abatement or deferment of rentals by the College. The lease
agreement expires in March 2029 and the bonds mature in September 2028.
INTEREST RATE DERIVATIVES: None
*Solid operating and capital support from Anne Arundel County (Aa1, Stable) and
the State of Maryland (Aaa, Stable). County and State operating support each
account for approximately one-quarter of the College's operating revenue, as
calculated by Moody's. County support has been flat during fiscal years 2008 to
2010, with no reductions expected in FY 2011. The College experienced a
modest 1% decline in State support in FY 2010 over the prior year, with an
additional 3% reduction of operating support in FY 2011. The State and County
increased capital support to an average of $10 million per year in fiscal years
2011 and 2012, up from $2 million in FY 2010.
*Moderate sized community college with growing enrollment, including substantial
online enrollment (approximately 30% of headcount enrollment in fall 2009). In
fall 2009, the College enrolled 11,546 full-time equivalent students. The
College is well-positioned to benefit from the significant increased presence of
the federal government in the County as a result of the Base Realignment and
Closure (BRAC) Commission's recommendations, the expansion of the National
Security Agency, as well as private defense contractors in the area.
Management estimates a 5% credit enrollment increase in fall 2010.
*Modest debt profile, with no future borrowing plans. Low debt levels reflect
the continued strong capital support from the State and County.
*Modest financial resource base at the College and affiliated
foundation provides limited coverage of debt and operations, with
expendable resources of $7.2 million covering debt by 0.5 times and operations
by 0.1 times in FY 2009, although cash and investments at the College are higher
at $21.6 million. Moody's notes that financial resources are depressed by a
growing other post-employment benefits (OPEB) liability, $9.8 million in FY 2009
estimated to reach $13.6 million in FY 2010. We expect the College to maintain
or modestly grow financial resources based on the Board of Trustee's policy to
maintain between five and ten percent of its current fiscal year total budgeted
expenditures as a tuition stabilization fund. The College administration
annually will make recommendations to the Board of Trustees in the use of any
tuition stabilization fund over this percent range
*Relatively thin operating performance, with additional deterioration in recent
years driven by the impact of OPEB expenses associated with the implementation
of GASB 45. Adjusting for non-cash expenses associated with OPEB, the College
generated a weak 2.6% cash flow margin in FY 2009. Management reports that
operating performance in fiscal years 2008 and 2009 were further weakened by
heightened expenses associated with transitioning into new and renovated
facilities. Preliminary FY 2010 results indicate improved, but still
narrow operating cash flow margins.
*Ongoing growth results in the need to invest in capital, programs, and
personnel. Management reports plans for approximately $22 million of capital
projects for FY 2011 and 2012, with approximately $21 million in funding
expected from the State and County. While the near-term outlook for capital
support is healthy, the State faces ongoing budget pressures that could result
in tightened support for higher education, especially should a trend of
revenue weakening continue.
As of May 2010, the Foundation's investment allocation included 43% in domestic
equities, 25% in fixed income, 18% in international equities, 7% in hedge
funds, and 7% in cash. For FY 2010, the Foundation experienced a 14.1% return.
Excluding the assets of the Foundation, the College held $21.5 million in
unrestricted monthly liquidity which covered nearly 65 days of cash expenses at
FYE 2009. The College's liquidity is primarily held in the Maryland Local
Government Investment Pool, with approximately a quarter held in cash at
The stable outlook reflects Moody's expectation that the College will continue
to grow student generated revenue to help offset near-term pressure on State and
County funding. The outlook also incorporates that the College and affiliated
foundation do not have near-term borrowing plans and that the College plans to
maintain a minimum level of financial reserves.
What Could Change the Rating - UP
Significant growth of financial resources, strengthened operating performance,
sustained student market position
What Could Change the Rating - DOWN
Sustained reduction in State or County support, deterioration of financial
resource base, deficit operating performance contributing to declines in net
KEY INDICATORS (FY 2009 financial data and fall 2009 enrollment data)
Total Enrollment: 11,546 students
Expendable Financial Resources: $7.2 million
Total Direct Debt: $14.6 million
Expendable Financial Resources to Debt: 0.5 times
Expendable Financial Resources to Operations: 0.1 times
Monthly Liquidity of the College: $21.5 million
Monthly Days Cash on Hand of the College: 64.5 days
Three-Year Average Operating Margin: -2.8%
Tuition and Auxiliary Revenue (% of Operating Revenue): 41.0%
Government Appropriations (% of Operating Revenue): 52.8%
Economic Development Revenue Bonds, Series 2002: A2
Anne Arundel Community College: Andrew Little, Executive Director of Finance,
(410) 777-2227 or Melissa A. Beardmore, Vice President for Learning Resources
Management, (410) 777-2532
METHODOLOGY & LAST RATING ACTION
The principal methodology used in assigning the rating was the Community College
Methodology, published on December 1999, 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
The last rating action with respect to Anne Arundel Community College was on
April 6, 2007 when the municipal finance scale rating of A3 was affirmed and the
outlook was revised to stable from negative. That rating was subsequently
recalibrated to A2 with a stable outlook on May 7, 2010.
Information sources used to prepare the credit rating are the following: parties
involved in the ratings and public information.
Moody's Investors Service considers the quality of information available on the
issuer satisfactory for the purposes of assigning a credit rating.
MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.
Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.
Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S AFFIRMS ANNE ARUNDEL COMMUNITY COLLEGE FOUNDATION'S A2 RATING ON THE ECONOMIC DEVELOPMENT REVENUE BONDS, SERIES 2002; OUTLOOK IS STABLE
Moody's Investors Service
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New York, NY 10007