TOTAL OF $43.8 MILLION OF DEBT OUTSTANDING
School District Refunding (Serial) Bonds, 2011
Expected Sale Date
NEW YORK, May 2, 2011 -- Moody's Investors Service has assigned an A2 rating to Troy City
School District's (NY) $9.8 million School District Refunding (Serial) Bonds,
2011. The bonds are secured by the district's general obligation unlimited tax
pledge. Concurrently, Moody's has affirmed the A2 underlying rating on
previously issued general obligation debt. The new issue refunds School District
Serial Bonds from 2001 and 2003, for an estimated net present value savings of
$568,000 (6.2% of refunded par).
SUMMARY RATING RATIONALE
The A2 rating assignment and affirmation reflects maintenance of
satisfactory fund balance levels and management's responsiveness to significant
cuts in state aid. The rating also incorporates moderately sized tax base, below
average socioeconomic indicators and an average debt profile after netting
considerable state support for debt.
-Management's ability to make difficult expenditure reductions to cope with
state aid cuts
-High dependence on state aid means the state wide education cuts are a larger
magnitude for the district
DETAILED CREDIT DISCUSSION
SATISFACTORY FINANCIAL POSITION; DISTRICT MANAGING STATE AID CUTS
General Fund financial position is satisfactory, although state aid cuts impose
budgetary pressure. After issuing deficit bonds in 2003, the district had three
consecutive operating surpluses and built reserves to a strong level. Relatively
small operating deficits in fiscal years 2006 to 2009 were partially offset by a
$811,000 operating surplus in fiscal 2010, bringing General Fund balance as a
percent of revenues to a satisfactory 17.2%. The district has not issued cash
flow notes since 2003.
The district's primary revenue source is state aid, 56% of fiscal 2010 revenues.
State aid decreased by $2.9 million in fiscal 2010 (a 5.7% reduction), and
the revenue loss was managed through both revenue and expenditure
adjustments. Property taxes, the second largest revenue source, was increased by
3.2 percent and full collection is guaranteed by Rensselaer County (G.O. rated
A1). Overall revenues came in $1.2 million over budget in fiscal 2010, largely
due to a refund of health insurance premiums. The district is in a consortium
for health insurance and premiums are set are the adoption of the budget. On the
expenditure side, expenses came in $9.1 million under budget, through
conservative budgeting, shifts in expenses to grant funding in the Special Aid
fund and reductions in employee benefits from health insurance savings. In both
fiscal years 2010 and 2011 the district operated under a contingency budget; and
has made necessary budgetary adjustments. Contingency budgets are required if a
district fails to achieve voter approval of expenditures and then expenditures
are restricted to a state computed limit. The district cut expenditures by $2
million in fiscal 2010, largely in instructional expenditures. Through layoffs
and attrition, officials indicate that staffing was reduced by fifty employees.
The district expects to close fiscal 2011 with balanced operations and little
change in General Fund balance. State aid was reduced modestly in fiscal 2011,
the property tax rate increased 2.3% and the district increased the utility tax
to the maximum permitted, three percent. On the expenditure side, staffing was
reduced by twenty employees.
For fiscal year 2012 state aid is being cut by $2.2 million and the district is
closing an elementary school, increasing elementary school class size and
cutting co-curricular and athletic spending to offset this loss. The extent of
layoffs will be determined by the outcome of labor negotiations currently
SIGNIFICANT TAX EXEMPT PRESENCE IN LOCAL ECONOMY
The district has a significant tax-exempt presence, population declines, and a
weak socioeconomic profile. The moderately sized $1.8 billion tax base (full
valuation) garners stability from employment opportunities in the nearby City of
Albany (G.O. rated A1). Assessed values have remained fairly flat over the
past five years, although full value growth has averaged a healthy 9% over the
past five years, reflecting moderate property value appreciation. In 2008, the
conversion of taxable land to tax-exempt by Rensselaer Polytechnic Institute's
(rated A3) and two regional hospitals contributed to the flat taxable values. A
revaluation by the City of Troy is planned and is expected to take about two
years to complete. While the overall affect could be neutral, shifts in tax
burden are expected. Wealth levels are generally in line with the medians for
upstate New York, but well-below statewide medians with per capita income and
median family income at 73% and 80% of the state, respectively. Full value per
capita is a below average $36,218.
ABOVE AVERAGE DEBT LEVELS MITIGATED BY SUBSTANTIAL STATE AID AND RAPID REPAYMENT
The district's adjusted debt burden will remain average, given relatively rapid
payout and significant state building aid. Sale of bond anticipation notes is
expected this summer to begin the district's middle school renovation project.
Voters approved $56 million in general obligation financing for the project.
Overall debt levels are substantially above average, with an overall debt burden
of 3.9% of full value. However, almost 40% of this debt is comprised of
obligations of overlapping jurisdictions, including the City of Troy. The
district's high debt levels are mitigated by the receipt of 88.5% state school
building aid, which reduces debt burden to a moderate 1.6% of full value. The
district's outstanding debt is entirely fixed rate. Amortization of principal is
rapid with 65% retired in 10 years. In 2003 the district issued deficit
reduction bonds; and because of available excess revenues the district has been
required to make accelerated redemption payments. Presently $1.1 million is
outstanding and final maturity is in 2013.
WHAT COULD MAKE THE RATING GO UP
-Substantial growth in the district's tax base
WHAT COULD MAKE THE RATING GO DOWN
-Reduction in operating reserves
2000 Census Population: 40,310
2011 full valuation: $1.8 billion
2011 Full value per capita: $44,264
FY10 General Fund Balance,
Total: $14.1 million (17.2% of revenues)
Undesignated: $3.8 million (14.7% of revenues)
Overall debt burden: 2.1% of full value
Overall debt burden, adjusted for state school building aid: 1.6%
Payout of principal (10 years): 65% in ten years
1999 Per capita income: $17,159 (73.4% of state)
1999 Median family income: $41,528 (80.3% of state)
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 and public information.
Moody's Investors Service considers the quality of information available on the
credit satisfactory for the purposes of assigning a credit rating.
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Public Finance Group
Moody's Investors Service
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MOODY'S ASSIGNS A2 RATING TO TROY CITY SCHOOL DISTRICT'S (NY) $9.8 MILLION G.O. SCHOOL DISTRICT REFUNDING (SERIAL) BONDS, 2011
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