LONG TERM RATING AFFIRMED
Primary & Secondary Education
Tax and Revenue Anticipation Notes Series 2011
Expected Sale Date
Tax and Revenue Anticipation Notes
NEW YORK, Aug 30, 2011 -- Moody's Investors Service has assigned a MIG 1 rating to Dry Creek
Joint Elementary School District's Tax and Revenue Anticipation Notes (TRAN). We
have also affirmed the Aa2 rating on the district 1997 general obligation bonds.
The rating reflects the district's very narrow projected fiscal 2012
general fund ending cash balance, which we anticipate will be
materially stronger than forecast. The general fund cash is also enhanced by the
availability of borrowable alternate liquidity, a key credit positive. The
somewhat modest borrowing size and above average set-aside timing for note
repayment are also credit strengths factored into the rating. The TRAN is
secured by the district's pledge of fiscal 2012 unrestricted receipts, which
generally comprise all taxes, income, revenue, cash receipts, and other legally
available funds attributable to fiscal 2012.
-Consistent history of outperforming cash projections that should continue in
-Satisfactory projected total ending cash balance with the inclusion of
available alternate liquidity
-Moderately sized borrowing as percentage of total projected receipts
-Above average set-aside timing for note repayment
-Potential mid-year budget cuts could pressure budget
-Narrow projected fiscal 2012 ending cash balance
SOLID PROJECTED FISCAL 2011 ENDING CASH BALANCE THAT CONTINUES PRACTICE OF
OUTPERFORMING CONSERVATIVE CASH FLOW FORECASTS
As it has for each of the last five years, Dry Creek's solid 11.1% projected
ending general fund cash balance significantly outperformed the original ending
cash balance projection. The district originally anticipated finishing fiscal
2011 with a narrow 2.3% ending cash balance. This expectation reflected the
district's long standing practice of building forecasts based on the expectation
of completely spending all budgeted disbursements. However, the district has
typically controlled school site costs thereby capturing significant savings at
the end of the year to result in higher ending cash balances than budgeted.
Since 2007, the district's actual ending cash has been no less than 28% higher
than the originally budgeted amount and in most years, well above that minimum
To generate the fiscal 2011 savings, the district implemented three furlough
days for teachers and management and one furlough day for classified staff. The
district had also assumed a more dire reduction in state money than was actually
received. We anticipate that the district will continue to closely monitor its
cash flow to produce stronger than projected results in fiscal 2012.
WEAK PROJECTED FISCAL 2012 GENERAL FUND CASH THAT COULD BE CHALLENGED BY
POTENTIAL MID-YEAR REDUCTIONS
The district's projected fiscal 2012 general fund ending cash balance is very
weak at just 2.1% of total general fund receipts. This level of cash is well
below the amount typically maintained by a California school district. However,
our rating considers that the district will continue to outperform its
forecasted cash flow projections and produce somewhat stronger actual results.
The district anticipates saving carryover money that is not spent as the schools
typically do not spend the entirety of their budgets. The district has typically
captured approximately $500,000 in carry-over money as schools manage costs
throughout the year. This year's carry-over savings are likely to be about
$250,000. In addition, another $350,000 will be received for class size
reduction funding. These additional monies would increase the 2012 ending cash
balance to 3.5%, still notably weak but sufficient for the rating when
considered in concert with the district's other credit strengths.
This forecast assumes another $10 million deferral and the restoration of
teaching positions as per AB 114.The district's exposure to the potential state
mid-year budget reductions is approximately $1.7 million. Were these cuts to
occur, it would reduce the district's ending cash to zero in absence of any
offsetting actions. However, the board has approved the use of
inter-fund borrowing and could implement classified employee layoffs to restore
the balance to a positive position.
PROJECTED ENDING CASH ENHANCED BY AVAILABLE ALTERNATE LIQUIDITY
A key credit positive is the availability of the district's $3.9 million in
alternate liquidity. The inclusion of these funds brings the total available
projected ending fiscal 2012 cash balance to a satisfactory 11.8% of total
general fund receipts. These funds can be borrowed across fiscal years without
having to be repaid in the same year in which they were borrowed. The monies
include $799,000 in the deferred maintenance fund, $2.8 million in the capital
facilities fund, and $306,000 in the reserve for capital outlay.
MODEST BORROWING AMOUNT AND ABOVE AVERAGE SET-ASIDE TIMING FOR NOTE REPAYMENT
The $2.9 million borrowing amounts to a modest 7% of projected fiscal 2012
receipts. The district will set-aside 50% of funds needed for note repayment in
January and April of fiscal 2012. This will result in an above average dollar
weighted set-aside of 3.5 months prior to fiscal year-end.
The TRAN is being issued to fund the district's mid-year cash flow needs. Dry
Creek's TRAN is one of an expected several Placer County school district TRANs
to be sold simultaneously using a single official statement. The notes are
separate securities, each one solely an obligation of the issuing district.
Projected Amount Borrowed as a % of Receipts, FY 2012: 7%
Actual Ending Cash as a % Receipts, FY 2010: 10.6%
Estimated Actual Ending Cash as a % of Receipts, FY 2011: 11.1%
Projected Ending Cash as a % of Receipts, FY 2012: 2.1%
Alternate Liquidity: $3.9 million (11.8% )
Pledged Set-Aside Timing (months before June): 3.5
The principal methodology used in this rating was Short-Term Cash Flow Notes
published in May 2007. Please see the Credit Policy page on www.moodys.com for a
copy of this methodology.
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MOODY'S ASSIGNS MIG 1 RATING DRY CREEK JESD'S 2011 TRANS ; APPROXIMATELY $2.9 MILLION IN DEBT AFFECTED
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