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MOODY'S ASSIGNS Aa2 RATING TO BETHPAGE U.F.S.D. (NY) $11.27 MILLION SCHOOL DISTRICT REFUNDING SERIAL BONDS, 2010

21 Sep 2010

Aa2 RATING APPLIES TO $21.8 MILLION IN OUTSTANDING G.O. DEBT, INCLUDING CURRENT ISSUE

Primary & Secondary Education
NY

Moody's Rating

ISSUE

RATING

School District Refunding Serial Bonds, 2010

Aa2

  Sale Amount

$11,270,000

  Expected Sale Date

09/21/10

  Rating Description

General Obligation

 

Opinion

NEW YORK, Sep 21, 2010 -- Moody's Investors Service has assigned a Aa2 underlying rating to Bethpage Union Free School District's (NY) $11.27 million School District Refunding Serial Bonds, 2010. At this time, Moody's has also affirmed the Aa2 rating on the district's $21.8 million of outstanding general obligation debt. The bonds are secured by the district's unlimited tax pledge. Proceeds will refund bond series 2002 for an expected net present value savings of $770,000, or 7.3% of refunded principal, which will be taken evenly throughout life of bonds.

RATINGS RATIONALE

The Aa2 rating reflects the district's healthy financial position, sizeable and fully developed Nassau County tax base in Nassau County (G.O. rated Aa3/negative) with strong socioeconomic characteristics and above-average tax payer concentration, and an average debt burden.

SOUND FINANCIAL POSITION MARKED BY HEALTHY RESERVE LEVELS

Bethpage Union Free School District's financial position is expected to remain stable given consistently conservative budgeting practices reflected in over five consecutive years of operating surpluses and strong reserve levels. The district has increased reserves from 14% to 21% of General Fund revenues from 2004 to 2009 as result of conservative budgeting of revenues and expenditures. In fiscal 2009 (ended June 30), the district ended the year with a $3.5 million operating surplus, driven by favorable settlements in PILOT (payments-in-lieu-of-taxes) revenues coming in over budget by $2.2 million and conservative budgeting of expenditures across the board. In fiscal year 2010 (unaudited), the district is expecting to utilize $1.7 million out of $1.9 million in fund balance appropriations. The expenditure savings are mainly driven by cuts in discretionary spending, an increase in early retirement, and reduced tuition costs due to increase staffing within the district for students with special needs. General fund balance decreased, however to a still adequate $12.9 million (18% of General Fund revenues), including $750,000 added to pension reserves.

The voter approved fiscal 2011 budget includes $1 million of state aid cuts, which is expected to have very limited impact on the district's operations given its already limited exposure to state aid and its strong liquidity position, contractual salary obligations, increases in health care and pension spending which are typical of a New York school district. The expenditure and state aid pressures are offset by a 5% increase in budgeted property tax revenues and $1.5 million appropriation of reserves to balance the budget. The district has not issued any Tax Anticipation Notes over the past two fiscal years given increased liquidity to manage the unevenness of property tax distribution in Nassau County. Property taxes comprise the majority of revenues make up 80.6% of fiscal 2009 revenues, for which the district is made whole by the county, providing some stability to this revenue source.

FULLY DEVELOPED TAX BASE IN NASSAU COUNTY

The district's $3.6 billion tax base is expected to continue to benefit from its location in Nassau County with easy access to employment opportunities in New York City (rated Aa2/stable) and Long Island. Assessed values have declined since 2004 reflecting the fully developed tax base and Nassau County revaluations which reduced assessments countywide from 2.9% of market value in 2003 to the current rate of 0.25% of market value. Full value has increased at an annual average rate of 10.1% over the past 5 years, inclusive of a 2.9% decrease in 2004 as a result of the County's revaluation, reflecting market appreciation. Nonetheless the district has seen a 7.7% drop in full valuation in 2010 due to the national housing slowdown however, consistent with neighboring communities. There is strong industrial concentration in the district's top ten tax payers which comprise 25.4% of assessed value. Northrop Grumman Corp. (Senior unsecured rated Baa1/stable), a defense contractor and employer of 3,000 is the largest district tax payer and is reportedly stable with potential for additional employment growth, as a result of recent contracts assigned. In addition, the district recently settled a new PILOT with Lunar Module that is expected to bring in $3.5 million in payments annually starting in fiscal year 2010. Income indices exceed state medians, and full value per capita is a strong $183,401, bolstered in part due to the healthy commercial presence.

AVERAGE DEBT BURDEN WITH LIMITED ADDITIONAL BORROWING PLANS

Moody's expects the district's direct debt burden (0.8% of full value) to remain manageable given average amortization of principal (68% repaid within 10 years) with limited additional borrowing plans. The district's overall debt burden is average at 2.4% of full valuation, due to the overlapping debt obligations of Nassau County and the Town of Oyster Bay (rated Aa2), but decreases to 2.1% of full value when state building aid (39.9%) is taken into consideration. All of the district's debt is fixed rate.

KEY STATISTICS

2000 Population: 19,498

2010 full valuation: $3.6 billion

2010 full value per capita: $183,401

Direct debt burden: 0.8%

Overall Debt burden: 2.4% (adjusted for state building aid: 2.1%)

Payout of principal (10 years): 68%

2000 Per Capita Income (as % of State and US): $28,635 (122.4% and 132.6%)

2000 Median Family Income (as % of State and US): $80,313 (155.4% and 160.5%)

FY09 General Fund balance: $15 million (20.9% of General Fund revenues)

Post-sale Parity Debt Outstanding: $21.8 million

RATING METHODOLOGY USED

The principal methodology used in rating Bethpage Union Free School District, NY was General Obligation Bonds Issued by U.S. Local Governments rating methodology published in October 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found 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.

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

Andy Moleon
Analyst
Public Finance Group
Moody's Investors Service

Cesar Avila
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
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS Aa2 RATING TO BETHPAGE U.F.S.D. (NY) $11.27 MILLION SCHOOL DISTRICT REFUNDING SERIAL BONDS, 2010
No Related Data.
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