Primary & Secondary Education
Note Participations, Series 2011A
Expected Sale Date
NEW YORK, Sep 14, 2011 -- Moody's Investors Service has assigned a MIG 1 rating to the Wisconsin School
Districts Cash Flow Administration Program's $20.5 million Note Participations,
SUMMARY RATINGS RATIONALE
The notes are secured by a combination of each district's revenues, including
property taxes levied for operations and state aid. The MIG 1 rating reflects
sound structural provisions with principal and interest payments sent to the
trustee 27 days prior to maturity, the credit characteristics of the pool
participants, and a sustained trend of strong pool management. The Series 2011A
notes represent collectively the tax and revenue anticipation notes of each of
the nine participating districts, though there is no joint liability, with the
notes representing direct and binding obligations of the individual school
Cash flow borrowing is common among Wisconsin school districts, reflecting
traditional low points in the cash flow cycle as revenues, primarily property
taxes and state aid, are experienced at discrete points throughout the fiscal
year. State aid comes largely in September, December, March and June and
property taxes are received in January, February and August. However,
expenditures occur on a more consistent schedule throughout the year, creating
peaks and troughs in the districts' cash position.
-Early set aside provides cushion for repayment
-Revenue streams for repayment set by state statue
-Reductions in state aid and school district revenue limits as part of the
Wisconsin state budget
EARLY SET ASIDE ENHANCES SECURITY ALONG WITH DISBURSEMENT DATE OF REVENUES SET
BY STATE STATUTE
The security of the notes is enhanced due to the requirement for an early set
aside of money for note repayment and that the timing of dispersal of the
primary revenues used for repayment is set by state statute. The provision for
impoundment of district repayment is 27 days prior to maturity. Though maturity
is October 15, 2012, the participants will impound all funds with the trustee,
U.S. Bank National Association (Long term rating Aa2/Negative outlook) by
September 18, 2012. The primary sources of revenues the districts will use for
note repayment are property taxes and state aid. The districts will all receive
property tax revenues on or before August 20, 2012 and a state aid payment on
September 17, 2012 both of which will be available for repayment of the notes.
By state statute, state aid must be disbursed on the third Monday of September
and property taxes must be disbursed by counties by August 20 of every
year. Altering these dispersal times would require a legislative
act. Historically the state of Wisconsin has not cut state aid mid-year, nor has
it changed these payment dates.
SOLID CREDIT CHARACTERISTICS OF POOL PARTICIPANTS
The pool's participants are school districts located throughout Wisconsin and
all possess credit characteristics consistent with short-term tax and revenue
anticipation borrowers of high credit quality. This note pool consists of eight
participants,all of which participated in the Series 2010A note pool. The
largest single participant is Fond du Lac (general obligation long-term rating
of Aa2) and represents 36.7% of the total pool borrowing. The other
pool participants are Friess Lake, Lake Mills (Aa3), McFarland (Aa3), Portage
(Aa3), Random Lake, Richland, and Shiocton (A1). For each district the amount
borrowed as a percent of revenues is less than 20%, ending cash balance as a
percent of receipts exceed or approximates 5% and the cash margin exceeds 105%.
These are viewed as favorable credit characteristics for cash flow borrowing
which in part support the assignment of the MIG 1 rating. Additionally, debt
service coverage at the time of impoundment is equal to or exceeds a solid 1.3
times for each district and each participant's obligation is payable from any
legally available source and unrestricted revenues. This pledge, along with the
credit quality of the pool participants, early set aside, and the statutorily
set revenue disbursement dates makes the likelihood of a complete default by any
single participant remote.
WHAT COULD CHANGE THE RATING - DOWN
-Significant shortening of early set aside provision
-Substantial deterioration of participant credit quality
Number of participants: 8
Largest participant portion: 36.7%
Impoundment date: September 18, 2012
Maturity date: October 15, 2012
PRINCIPAL METHODOLOGY USED
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.
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 rating are the following: parties
involved in the ratings, parties not involved in the ratings, public
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.
Public Finance Group
Moody's Investors Service
Public Finance Group
Moody's Investors Service
Journalists: (212) 553-0376
Research Clients: (212) 553-1653
MOODY'S ASSIGNS MIG 1 RATING TO WISCONSIN SCHOOL DISTRICTS CASH FLOW ADMINISTRATION PROGRAM'S $20.5 MILLION NOTE PARTICIPATIONS, SERIES 2011A
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007