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New Issue:

MOODY'S ASSIGNS A1 RATING TO $3.8 MILLION WAPPINGERS CENTRAL SCHOOL DISTRICT'S (NY) SCHOOL DISTRICT (SERIAL) BONDS, 2011 SERIES A

17 Jun 2011

AFFIRMATION OF A1 RATING APPLIES TO $25.9 MILLION OF GENERAL OBLIGATION DEBT

Primary & Secondary Education
NY

Moody's Rating

ISSUE

RATING

School District (Serial) Bonds, 2011 Series A

A1

  Sale Amount

$3,750,000

  Expected Sale Date

06/21/11

  Rating Description

General Obligation

 

Opinion

NEW YORK, Jun 17, 2011 -- Moody's has assigned an A1 rating to Wappingers Central School District's (NY) $3.8 million School District (Serial) Bonds, 2011 Series A. Proceeds from the current issue, which is secured by the district's general obligation unlimited tax pledge, will finance all outstanding tax certiorari settled claims.

Concurrently, Moody's has affirmed the A1 rating on the school district's $25.9 million in outstanding general obligation debt.

SUMMARY RATINGS RATIONALE

The A1 rating reflects the district's constrained financial position with limited reserve levels, and narrow liquidity. The rating also factors the district's sizeable tax base with above average income levels and a manageable debt burden.

STRENGTHS:

-Sizable and affluent residential tax base

-Manageable debt position

CHALLENGES:

-Narrow liquidity position

-Expectation of continued increases to health care and pension costs

-Ongoing tax certiorari exposure

DETAILED CREDIT DISCUSSION

FINANCIAL POSITION TO REMAIN NARROW IN THE MEDIUM TERM

The district's reserve position is expected to remain stable over the near term, albeit at low levels, given the district's conservative budget practices. However, the district's reliance on General Fund balance as a revenue source and expenditure pressure from ongoing tax appeals are expected to hamper the district ability to augment reserves to levels consistent with the current rating category. Fiscal 2010 resulted in an operating surplus of $840,000, increasing the General Fund balance to $4.1 million (a still-narrow 2.3% of revenues). The surplus was primarily driven by a one-time accounting adjustment recognizing additional bond proceeds of $896,000 and the $8.8 million one-time additional revenue from federal stimulus aid. The district's net cash position remained weak, and without a $6.0 million Revenue Anticipation Note issued due to delayed state aid, the General Fund would have had a net cash deficit of $581,000 (-0.3% of revenues). In addition, as of fiscal 2010, the General Fund receivable by the Capital Project fund totaled $3.9 million - while, the Capital Project fund balance stood at a $10.9 million deficit. Consequently, Moody's has factored into the current rating that the General Fund will not receive the $3.9 million receivable and therefore, the General Fund balance is a weak $200,000. Nearing the close of the fiscal year, the district anticipates an operating surplus of approximately $3.0 to $4.0 million for fiscal 2011 due to favorable expenditure performance including 76 position eliminations and school supply cuts.

Importantly, the district attained operating surpluses in fiscal 2009 and 2010 despite rising tax certiorari settlements. From a relatively modest $251,000 in tax refund for fiscal 2008, the district paid out $1.2 million and $1.9 million in fiscal 2009 and 2010, respectively, primarily from available funds. Prospectively, officials indicate the district's projected tax certiorari exposure is approximately $10.0 to $15.0 million based on current submitted claims.

The district's largest revenue source, property taxes, represents 69% of fiscal 2010 revenues and is remitted in full each year by Dutchess (G.O. rated Aa1) and Putnam (G.O. rated Aa2) counties. State aid is the second largest source of revenue accounting for 24% of revenues.

SIZABLE TAX BASE WITH AFFLUENT DEMOGRAPHIC PROFILE

The district's $9.6 billion tax base has decreased 12.7% since 2008 reflecting continued housing market weakness. Current tax certiorari claims remain high with potential refunds amounting to approximately $3.3 million in fiscal 2011. Taxpayer concentration is below-average, with the top 10 taxpayers representing 6.2% of full value. A strong resident demographic profile is reflected in per capita and median family incomes of 124% and 144% of national medians, respectively, and a strong full value per capita of $143,680. The county's current unemployment level of 7.3% (April 2011) is below state and national levels of 7.7% and 8.7%, respectively.

MANAGEABLE DEBT BURDEN; MODEST FUTURE BORROWING PLANS

The district's low debt burden is expected to remain manageable in the face of future debt plans given rapid principal amortization and significant state aid support for debt service. The district's direct debt burden is a low 0.4% of full value, which increases to a below-average 1.4% of full value when taking into account the overlapping debt of local municipalities. The application of state building aid reduces this figure to 1.2% of full value. The district has plans to issue $407,000 in bond anticipation notes for acquisition of transportation vehicles and, similar to the last 5 years, $7.0 million Tax Anticipation Notes in fiscal 2012. The additional debt is expected to have a limited impact on the district's debt profile. The district has no exposure to variable rate debt or derivative agreements.

What could make the underlying rating change - UP

-- Increased General Fund reserves

-- Increased net cash position

What could make the underlying rating change - DOWN

--Increasing levels of short-term cash flow borrowing

--Multi-year General Fund deficits, thereby limiting the district's financial flexibility

-- Significant deterioration in taxable values or demographic profile

KEY STATISTICS:

2000 Population: 66,797

2011 Full valuation: $9.6 billion

2011 Full value per capita: $143,680

Direct debt burden: 0.4%

Overall debt burden (adjusted for school building aid): 1.4% (1.2%)

Payout of principal (10 years): 90.6%

Fiscal 2010 General Fund balance: $4.1 million (2.3% of General Fund revenues)

Per capita income: $26,844 (114.8% of the state and 124.4% of the US)

Median family income: $72,162 (139.6% of the state and 144.2% of the US)

Post-sale debt outstanding: $38.5 million

Post-sale G.O. debt outstanding: $29.7 million

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

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, and parties not involved in the ratings.

Moody's Investors Service considers the quality of information available on the credit 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.

Analysts

Lawrence Bellinger
Analyst
Public Finance Group
Moody's Investors Service

Andy Moleon
Backup Analyst
Public Finance Group
Moody's Investors Service

Geordie Thompson
Senior Credit Officer
Public Finance Group
Moody's Investors Service

Contacts

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


Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS A1 RATING TO $3.8 MILLION WAPPINGERS CENTRAL SCHOOL DISTRICT'S (NY) SCHOOL DISTRICT (SERIAL) BONDS, 2011 SERIES A
No Related Data.
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