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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

01 Sep 2011

Primary & Secondary Education
CA

Moody's Rating

ISSUE

RATING

2011-2012 Tax and Revenue Anticipation Notes

MIG 1

  Sale Amount

$6,500,000

  Expected Sale Date

09/21/11

  Rating Description

Tax and Revenue Anticipation Note

 

Opinion

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).

RATING RATIONALE

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.

STRENGTHS

- Reasonably projected fiscal 2012 ending general fund cash balance of approximately 5% of receipts

- Access to sizable available alternate liquidity

- Manageable borrowing amount

CHALLENGES

- 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 year-end.

KEY STATISTICS

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.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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 considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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 Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Analysts

Kevork Khrimian
Analyst
Public Finance Group
Moody's Investors Service

Dari Barzel
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA

MOODY'S ASSIGNS MIG 1 RATING TO $6.5 MILLION WESTERN PLACER UNIFIED SCHOOL DISTRICT'S 2011 TAX AND REVENUE ANTICIPATION NOTES
No Related Data.
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