AFFIRMATION OF A1 RATING APPLIES TO $25.9 MILLION OF GENERAL OBLIGATION DEBT
Primary & Secondary Education
School District Refunding (Serial) Bonds, 2011
Expected Sale Date
NEW YORK, Mar 14, 2011 -- Moody's has assigned an A1 rating to Wappingers Central School District's (NY)
$8.0 million General Obligation Bonds, 2011. Proceeds from the current issue,
which is secured by the district's general obligation unlimited tax pledge, will
refund the district's Series 2001 bonds for a net present value savings of
2.4% of refunded principal.
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, narrow liquidity, sizeable tax base with above
average income levels, and the district's manageable debt burden.
-Sizable and affluent residential tax base
-Manageable debt position
-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
Following the peak of General Fund reserves in fiscal 2004 ($8 million; 6.3% of
revenues), the district ran sizeable operating deficits in fiscal 2005 ($3.0
million) and 2006 ($1.8 million), primarily due to large fund balance
appropriations and the overbudgeting of state aid. In fiscal 2007, the district
increased General Fund balance by $369,000, ending the year with $3.97 million
General Fund reserves (a limited 2.6% of revenues), well below the state median
for similarly-rated districts. The district's net cash position declined
significantly to a very narrow 0.5% of revenues, reflecting interfund borrowing
by the Capital Projects Fund ($2.9 million), resulting in weak liquidity. In
fiscal 2008, the district achieved partial replenishment of a $2.5 million
appropriation of reserve, primarily due to revenue overages ($1.3 million) in
local sources offset in part by expenditure overages ($637,248) in general
support and instruction. The resulting operating deficit of $1.9 million reduced
General Fund reserves to $2.1 million (a slim 1.3% of revenues). The district
ran operating surpluses in fiscal 2009 and 2010, but its net cash position
continued to deteriorate. In fiscal 2009, the district ended the year with a
still-limited 1.9% in General Fund reserves ($3.3 million), up $1.2 million
from the prior year's reserves, driven by favorable health care expenditures and
positive variances in state aid and donations. 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. The district's net cash position remained weak, and without a $6.0 million
Revenue Anticipation Note issue, the General Fund would have had a net
cash deficit of $581,000 (-0.3% of revenues) due to delayed state aid.
Management anticipates an operating surplus in fiscal 2011 due to
favorable expenditure performance. Moody's believes the district's
narrow financial operations will remain constrained given the district's
tax certiorari exposure, limited reserves and liquidity, combined with the
expectation of future expenditure increases related to wages, health care and
pensions. 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
relatively 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 7.4% (December 2010) is below state
and national levels of 8.0% and 9.1%, 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 1.3% of full value when
taking into account the overlapping debt of local municipalities.
The application of state building aid (52.2%) reduces this figure to 0.8% of
full value. The district has plans to issue approximately $3.3 million of
additional debt in the near term, which is expected to have a limited impact on
the district's debt profile.
What could make the underlying rating change - UP
-- Increased General Fund reserves
-- Increased net cash position
What could make the underlying rating change - DOWN
-- Multi-year General Fund deficits, thereby limiting the district's financial
-- Significant deterioration in taxable values or demographic profile
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): 1.3% (0.8%)
Payout of principal (10 years): 90.9%
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: $34.1 million
Post-sale G.O. debt outstanding: $25.9 million
The principal methodology used in this rating was General Obligation
Bonds Issued by U.S. Local Governments published in October 2009.
Information sources used to prepare the credit rating are the following: parties
involved in the ratings, parties not involved in the ratings, public
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.
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 ASSIGNS A1 RATING TO $8.0 MILLION WAPPINGERS CENTRAL SCHOOL DISTRICT'S (NY) G.O. BONDS
Moody's Investors Service
250 Greenwich Street
New York, NY 10007