Primary & Secondary Education
2011-2012 Tax and Revenue Anticipation Notes
Expected Sale Date
Tax and Revenue Anticipation Note
NEW YORK, Sep 1, 2011 -- Moody's Investors Service has assigned a MIG 1 rating to the Western
Placer Unified School District's 2011 Tax and Revenue Anticipation Notes (TRAN).
The rating reflects the district's sufficient level of total projected fiscal
2012 ending cash balance that is supplemented by the availability of alternate
liquidity. The generally reasonable and somewhat conservative nature of the
projections, and the above-average set-aside-timing for note repayment are also
factored into the rating. The notes are secured by the district's fiscal 2012
unrestricted receipts, which generally comprise all taxes, income, revenue, cash
receipts, and other legally available funds. The TRAN is being issued to fund
the district's mid-year cash flow needs. Western Placer's TRAN is one of several
expected 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.
- Reasonably projected fiscal 2012 ending general fund cash balance of
approximately 5% of receipts
- Access to sizable available alternate liquidity
- Manageable borrowing amount
- Possible mid-year revenue cuts
- Recent history of deficit spending and drawdown of cash
DETAILED CREDIT DISCUSSION
FIRST TRAN ISSUANCE SINCE 2009
The district was an annual TRAN issuer through fiscal year 2009. However, due to
a seldom applicable Education Code section, in 2010 the district received a
large, one time sum from the state as compensation for previously forgone
revenues. The district lost its basic aid status because it transfers property
taxes to a large, independent study, charter school in the district. The
Education Code provides relief for eleven or so school districts in the same
situation as they are entitled to receive state aid funding for a portion of
the lost property tax revenue. As a result of this one time influx of $18
million, the district did not issue notes in 2010 and 2011. However in those
years, the district incurred significant general fund deficits, which drew down
its cash and necessitated this borrowing for 2012. Although we have no prior
projections to assess the accuracy of the district's 2011 projections, the
district's 2011 cash flows indicate continued draw-down of its general fund cash
to $9.2 million or a still ample 19.2% of receipts.
SIGNIFICANTLY NARROWER PROJECTED FISCAL 2012 ENDING CASH BALANCE; DISTRICT MAY
BE CHALLENGED BY POSSIBLE MID-YEAR REVENUE CUTS
The district's projected fiscal 2012 ending cash balance is a minimally adequate
5.1% of projected receipts. However, this projection is somewhat conservative.
School districts are exposed to mid-year trigger cuts to revenue limit funding
that are set occur if state tax revenues do not meet projected levels by
December 2011. Therefore, the district's projections are based on $323 per
student less than the amount it would receive in the absence of mid year cuts.
Further, projections also reflect additional deferrals of state revenues. As a
result, the district's 2012 projections show revenue limit receipts of $28.7
million, instead of the state approved amount of $32.5 million. Overall receipts
are projected to be $4.7 million or 9.8% less than in fiscal 2011.Overall
expenditures are projected to be $940,000 or 1.8% less than in fiscal
2011. Salaries and benefits are projected to decrease by $1.6 million or 3.6%
largely due to retirements. The net result of the large revenue decrease and
moderate expenditure decrease is an overall reduction in cash of 6.4% million,
reducing the June 30, 2012 ending balance to $2.7 million or minimally
sufficient 5.1% of receipts.
AVAILABLE ALTERNATE LIQUIDITY SIGNIFICANTLY SUPPLEMENTS PROJECTED FISCAL 2012
ENDING CASH AND IS A KEY ELEMENT OF RATING ASSIGNMENT
The district's projected fiscal 2012 ending cash balance is supplemented by the
availability of $3.6 million in alternate liquidity held in funds outside of the
district's general fund. This liquidity is money that can be borrowed across
fiscal years and in most cases repaid within 90 days of the following fiscal
year, consistent with the timing of state deferrals. The monies include
$2.1 million in the district's Deferred Maintenance fund, $800,000 in its
Special Reserve Fund 17 and smaller amounts in its Adult Education, Child
Development, Cafeteria Special Reserve, Special Reserve for Capital Outlay and
Capital Facilities funds. These monies raise the fiscal 2012 projected ending
cash balance to a sizable 13.4% of projected receipts.
MANAGEABLE BORROWING AMOUNT; ABOVE AVERAGE SET-ASIDE TIMING FOR NOTE REPAYMENT
The $6.5 million borrowing amounts to a manageable 15.1% of projected fiscal
2012 receipts, slightly higher than borrowing levels of other Moody's rated
California school districts. The district will set-aside 50% of funds needed for
note repayment in January and in April of fiscal 2012. This will result in
an above average dollar weighted set aside of 3.5 months prior to fiscal
Projected Amount Borrowed as a % of Receipts, FY 2012: 15.1%
Estimated Actual Ending Cash as a % of Receipts, FY 2011: 19.2%
Projected Ending Cash as a % of Receipts, FY 2012: 5.1%
Alternate Liquidity: $3.6 million
Pledged Set-Aside Timing (months before June): 3.5
The principal methodology used in this rating was The principal
methodologies used in assigning the rating was Moody's Short-Term Cash Flow
Notes, published on May 2007. Please see the Credit Policy page on
www.moodys.com for a copy of this methodology.
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Moody's Investors Service
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MOODY'S ASSIGNS MIG 1 RATING TO $6.5 MILLION WESTERN PLACER UNIFIED SCHOOL DISTRICT'S 2011 TAX AND REVENUE ANTICIPATION NOTES
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