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New Issue:

MOODY'S ASSIGNS Aa2 RATING TO EASTCHESTER UNION FREE SCHOOL DISTRICT'S (NY) $8.4 MILLION SCHOOL DISTRICT REFUNDING SERIAL BONDS - 2010

08 Oct 2010

Aa2 RATING APPLIES TO $25 MILLION IN RATED DEBT OUTSTANDING, INCLUDING CURRENT ISSUE

Primary & Secondary Education
NY

Moody's Rating

ISSUE

RATING

School District Refunding Serial Bonds, 2010

Aa2

  Sale Amount

$8,400,000

  Expected Sale Date

10/14/10

  Rating Description

General Obligation

 

Opinion

NEW YORK, Oct 8, 2010 -- Moody's Investors Service has assigned a Aa2 rating to $8.4 million Eastchester Union Free School District Refunding Serial Bonds - 2010. The bonds are secured by the district's general obligation, unlimited tax pledge. Concurrently, Moody's has affirmed the A1 rating on the district's $23.6 million previously issued general obligation debt.

RATING RATIONALE

The Aa2 rating reflects the district's affluent tax base marked by a trend of successful tax appeals, stable, albeit narrow, financial position and below average debt burden. The Aa2 rating also incorporates the district's annual receipt of property taxes, remitted by the Town of Eastchester (G.O. rated Aa1). Proceeds from the bonds will refinance the Series 2002 bonds with an estimated net present value savings of 10.7%.

RESERVE LEVELS EXPECTED TO REMAIN STABLE AT RELATIVELY NARROW LEVELS

Moody's expects the district's financial operations and reserve levels to remain stable and adequate given a history of surplus operations in four out of past six fiscal years and a fund balance level that averaged 5.7% of the revenues since fiscal 2005, a level below the median for New York school districts (16.4%). While the fiscal year 2005 results indicate an operating deficit of $1.6 million, officials report that this was a result of $1.6 million of encumbered reserves related to services rendered in fiscal year 2004 but not expensed until fiscal 2005. The district restored surplus operations in fiscal years 2006 and 2007, increasing the General Fund reserves to a satisfactory $3.0 million (5.4% of revenues) and $3.9 million (6.6% of revenues), respectively, driven by conservative budgeting of tuition revenues. The district ended the fiscal year 2008 with a modest operating deficit of $219,000, driven by one-time use of $404,000 related to early retirement incentives. The district's ending fund balance at fiscal year-end 2008 was a relatively narrow $3.7 million (5.7% of revenues).Fiscal year 2009 ended with another moderate use of fund balance to a narrow $3.5 million (5.4% of revenues) driven primarily by higher than anticipated general support and transportation expenditures which were only partially offset by positive variances in instruction and employee benefits. Positively, management reports that fiscal 2010 ended with a $600,000 operating surplus to increase the General Fund balance to $4.1 million (6.1% of estimated revenues). The General Fund balance increases were the result of expenditure controls, specifically a freeze on all expenditures and eliminating a number of positions.

The district's voter-approved fiscal 2011 budget represents a 2.43% increase over the previous year, budget-to-budget. The budget includes an increased fund balance appropriation of $800,000 (as compared to $600,000 in 2010) and a 3.2% tax levy increase to offset growing expenditure pressures related to salary, healthcare and energy costs. District operations are primarily funded through local taxes (86%), full collection of which is guaranteed by the Town of Eastchester.

The district is an annual issuer of Tax Anticipation Notes (TANs) to provide liquidity for its financial operations due to the uneven distribution of property taxes during the course of the fiscal year, with the first sizable tax payment not received until October. The district's $13 million borrowing in fiscal 2011 represents an increase in borrowing over the prior year's $12 million (dated June 29, 2010; maturing December 29, 2010).

AFFLUENT TAX BASE MARKED BY A TREND OF SUCCESSFUL TAX APPEALS

Located in Westchester County (G.O. rated Aaa/stable outlook), the district is an affluent and predominately residential (95% of assessed value) community. The district's taxable assessed valuation has experienced an average 1.8% loss in value annually from 2006 to 2011, driven by successful tax appeals. Officials expect appeals to continue going forward and plans to issue bonds for this potential liability, in line with its historical practice. Given the district's mostly built out nature with little new construction activity and the overall down turn in the housing market, full value had declined the past two years to $3.7 billion from a high of $4.4 billion in fiscal 2009. Moody's expects continued short-term declines in the overall housing market. However, the district draws economic stability from its location and ability to commute to several employment centers, including New York City (G.O. rated Aa2/stable outlook), White Plains (G.O. rated Aa1) and Greenwich, CT (G.O. rated Aaa). Wealth indices, marked by a substantial $214,934 full value per capita, are well above the state median.

MODEST DEBT POSITION

Moody's expects the district's debt position to remain modest given lack of significant borrowing plans. The district's direct debt burden is low at 0.7%, increasing to 1.3% when overlapping debt obligations of Westchester County, the Town of Eastchester and the Village of Tuckahoe (G.O. rated Aa2) are incorporated. Adjusted for state school building aid of approximately 15.3%, the district's adjusted overall debt burden falls slightly to 1.2% of full valuation. Principal is amortized at an average rate, with 77.4% retired within 10 years. Debt service comprised a manageable 5.3% of operating expenditures in fiscal 2009. The district is not party to any derivative agreements and does not have any variable or auction rate debt outstanding.

WHAT COULD MAKE THE RATING GO UP

-Improved General Fund balance in line with similarly sized New York school districts.

-Improved liquidity with less reliance on cash flow borrowing

-Stabilized assessed and full valuations

WHAT COULD MAKE THE RATING GO DOWN

-General Fund balance declines below historical levels

-Greater reliance on cash flow borrowing to offset declining liquidity.

-Significant declines in tax base.

KEY STATISTICS:

2000 census population: 17,235

2011 full valuation: $3.7 billion

2011 full value per capita: $214,934

1999 per capita income: $39,488 (168.8% of State and 182% of US)

1999 median family income: $90,392 (174.9% of State and 180.6% of US)

Direct Debt burden: 0.7% of full value

Adjusted Debt Burden: 1.2% of full value

Payout of principal: 77.4% retired with 10 years

2009 General Fund balance: $3.5 million (5.4% of General Fund revenue)

Current Debt Outstanding: $25 million

The principal methodology used in rating Eastchester 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 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

Robert Weber
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 EASTCHESTER UNION FREE SCHOOL DISTRICT'S (NY) $8.4 MILLION SCHOOL DISTRICT REFUNDING SERIAL BONDS - 2010
No Related Data.
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