RATING REFLECTS THE STATE OF KENTUCKY SCHOOL DISTRICT ENHANCEMENT PROGRAM
Bardstown Independent School District, KY
Primary & Secondary Education
KY
Moody's Rating
ISSUE | RATING |
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School Building Refunding Revenue Bonds, Series of 2010 | Aa2 |
Sale Amount | $6,380,000 |
|---|
Expected Sale Date | 09/23/10 |
|---|
Rating Description | Lease Rental |
|---|
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Opinion
NEW YORK, Sep 22, 2010 -- Moody's Investors Service has assigned a Aa2 enhanced rating (KSDE) with a
negative outlook to the Bardstown Independent School District
Finance Corporation's (KY) $6,380,000 School Building Refunding Revenue Bonds,
Series of 2010.
RATINGS RATIONALE
The rating reflects Moody's assessment of the additional security provided by
the Kentucky School District Enhancement Program (KSDE). The negative outlook on
the enhanced rating reflects the negative outlook on the commonwealth's long
term rating. The issuance will refund the principal, accrued interest and
premium on the Bardstown Independent School District Finance Corporation's
School Building Revenue Bonds, Series of 2002.
The KSDE program demonstrates generally average to strong state commitment and
program history as defined by the first factor of the intercept
methodology published February 2008. The funds available for intercept
include any unexpended General Fund amounts appropriated by the commonwealth
and allotted to the school district for the current biennium and allotments to
be made to the local school district in future budget bills. The ability to
advance funds crosses fiscal years and thus we do not focus on current year
coverage levels.
State oversight of the program is strong as school district operating budgets,
long-term facilities plans and debt issuances must be reviewed and approved by
the state Department of Education (DOE). The state's oversight is further
reflected in the DOE's ability to access school district financials on a real
time basis and a track record of state intervention in under-performing schools.
State statute is silent with regard to commitment to bondholders; there is no
covenant not to repeal, revoke, rescind, modify or amend the statutory authority
for the intercept. The expectation of continued state support is strong as the
intercept program benefits school capital financings, an essential public
purpose. Though the program has never been utilized, the state has demonstrated
strong commitment to school capital financings and the intercept program's
mechanics should result in full and timely payment of debt service, if the
program were to be invoked.
The KSDE program demonstrates generally average to strong program mechanics, the
second factor of the intercept methodology. Intercept mechanics are established
in state statute (KRS 160.160) and an administrative policy document. The
mechanics of the intercept program require lease rental payments be made
directly to the paying agent 10 days prior to a debt service due date and direct
the paying agent to notify DOE if payment of principal or interest has not been
received three days prior to the date on which the debt service payment is due.
Upon notification by the paying agent, DOE must forward, from available
funds (as described above), the amount due to the paying agent. In the event
that the School Facilities Construction Commission (SFCC), an instrumentality of
the commonwealth, has entered a participation agreement for a set percentage of
debt service on a particular bond series, the portion of debt service to be paid
by SFCC is required to be sent directly to the paying agent on the day debt
service is due. The agreement entered into with SFCC requires SFCC to notify the
school district as well as the original purchaser of the bonds 60 days prior to
the end of a biennium if SFCC is not appropriating for their previously
agreed upon percentage of debt service in the coming biennium. In this case, the
school district would, as per the lease, appropriate for the gross debt service
coming due and KSDE program mechanics would apply. Historically, continuing
spending resolutions have been adopted in the absence of a legislatively
approved budget. Moreover, as per 2005 state Supreme Court ruling, once
local school district debt has been authorized by the General Assembly
related debt service is authorized on a continuing basis. The case also holds
that continuing appropriations for public schools, in the absence of a
legislatively approved budget, is permitted. Moody's therefore concludes that
late budget passage likely will not be a factor placing at risk the availability
of funds under the intercept program. Based on the overall assessment of program
mechanics described above, Moody's categorizes program mechanics as generally
average to strong.
Moody's assigns an enhanced rating to specific financings after an evaluation of
two major factors: the sufficiency of interceptable revenues and the transaction
structure. This financing rates strong on the criterion of sufficiency (Factor 3
of the rating methodology) due to the stability of state aid payments, the
ability to accelerate state aid for intercept, and because, as described
above, the ability to advance interceptable funds crosses fiscal years and
continuing appropriations for public schools are permitted in the absence of an
approved budget.
In addition, this financing also rates average, on Factor 4 of the methodology
(Presence of and Role of Fiduciary and Reserve Fund). There is a paying agent
who is required to notify the state prior to the debt service payment date if
sufficient funds are not available. Reserve funds are not typically utilized to
support intercept financings supporting school districts, and there is no
reserve fund in the KSDE program.
KEY STATISTICS: Bardstown Independent School District
Population (County estimate): 11,690
2010 Full Valuation: $1.02 billion
2010 Full Valuation per capita: $87,233
Median Family Income as % of State Avg.: 102.4%
Per Capita Income as % of State Avg.: 98.6%
Direct Debt Burden: 2.4%
Post-sale Parity Debt Outstanding: $22.98 million
FY 09 General Fund Balance: $777,388 (5% of General Fund revenues)
The principal methodology used in rating the current issue was "State Aid
Intercept Programs and Financings", published in February 2008 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 Moody's website.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
Parties involved in the ratings, parties not 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.
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
Brian Valentine
Analyst
Public Finance Group
Moody's Investors Service
Robyn Rosenblatt
Backup Analyst
Public Finance Group
Moody's Investors Service
Contacts
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA
MOODY'S ASSIGNS Aa2 ENHANCED RATING (KSDE) TO BARDSTOWN INDEPENDENT SCHOOL DISTRICT FINANCE CORP'S (KY) $6,380,000 SCHOOL BUILDING REFUNDING REVENUE BONDS, SERIES 2010
