S&P - Public Finance Criteria (2007). - The Global Clearinghouse

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Higher EducationSelected Public College/University Financial Ratios (GASB)Income statement ratios Revenue diversity (all numerators divided by adjusted operating revenues)Net tuition dependenceNumerator = net tuitionStudent dependence (net tuition + auxiliary rev)Numerator = net tuition + auxiliary revenueState operating appropriationsNumerator = state operating appropriationsGrants and contractsNumerator = state, private, and federal grantsGiftsNumerator = giftsAuxiliary incomeNumerator = auxiliary incomeHealth care incomeNumerator = total health care incomeTotal adjusted operating expensesAudited operating expenses plus appropriate nonoperating expensesconsidered to be operating expenses, such as interest expenseTotal Adjusted Operating RevenuesAudited operating revenues plus appropriate nonoperating revenuesconsidered to be operating revenues such as state appropriations,investment income, and private giftsOperating results (all ratios computed relative to adjusted operating expensesChange in adjusted operating incomeChange in estimated operating income/adjusted operating expensesChange in unrestricted net assetsChange in UNA/adjusted operating expensesChange in total net assetsChange in total net assets/adjusted operating expensesBalance sheet ratios Liquidity and debt ratiosCash and investments/expensesCash and investments/pro forma debtCash and investments/outstanding debtUNA/expensesUNA/pro forma debtUNA/ outstanding debtAdjusted UNA/expensesAdjusted UNA/pro forma debtAdjusted UNA/outstanding debtAdjusted UNADebt burdenCurrent debt service burdenMADS burdenPro forma MADS burdenAverage age of plant (years)Full-time equivalent measuresNet tuition per FTE ($)State operating appropriations per FTE ($)Outstanding Debt per FTE ($)Pro forma debt per FTE ($)Net capital assets per FTEEndowment per FTEUniv. C&I/adjusted operating expensesUniv. C&I/pro forma debt principalUniv. C&I/outstanding debt principalUNA/adjusted operating expensesUNA/pro forma debt principalUNA/pro forma debt principalAdjusted UNA/adjusted operating expensesAdjusted UNA/pro forma debt principalAdjusted UNA/pro forma debt principalUNA, adjusted at analytical discretion to include: foundation quasiendowment or foundation UNA; debt service reserves; debt servicebalances; board-designated reserves or endowment; university-heldquasi endowment not included in UNACurrent debt service/adjusted operating expensesCurrent MADS/adjusted operating expensesProjected MADS/adjusted operating expensesAccumulated deprecation/annual depreciation expenseNet tuition/total full-time equivalent studentsTotal state operating appropriations/total full-time equivalent studentsOutstanding debt/total full-time equivalent studentsProforma debt/total full-time equivalent studentsNet capital assets/total full-time equivalent studentsEndowment (market value)/total full-time equivalent studentswww.standardandpoors.com183
Education And Non-Traditional Not-For-Profitsdifferent from that of a private institution. Forexample, while a large financial cushion allows auniversity more flexibility and independence fromthe state, some public institutions are limited as tothe amount of unrestricted reserves they can retain.Standard & Poor’s considers public colleges anduniversities with unrestricted resources below 5%of total annual operating expenses to be vulnerableto severe operating constraints. Capital campaignsto increase unrestricted resources or endowment arelooked upon favorably.MissionAlthough analysis of demand is similar for privateand public universities, ratings of public schools aresometimes skewed by the institutions’ role in providingeducation and the importance of state support.Standard & Poor’s generally regardsacceptance and matriculation rates as key factors indetermining an institution’s overall demand position.However, public institutions generally havemore liberal or open admissions requirements, andacceptance rates for public schools (ranging from30%-80%) are generally not as competitive asthose for comparably rated private institutions. Inaddition, while some premier public institutionshave very high student quality indicators, andacceptance rates may equal those of more selectiveprivate institutions, many public institutions exhibitlower quality measures because of open admissionspolicies. However, a public university may be a primaryprovider of higher education, or the state’sflagship institution and matriculation rates may bevery high. Thus, public universities are often highlyrated, despite having less admissions flexibility thantheir private counterparts.Legal provisionsSince public universities enjoy state funding support,they have less need to guard against revenuevolatility. Where the debt being rated is a GO, orequivalent, of a public institution, a debt servicereserve is not needed if a college has met tworatios for each of the past three years. First, unrestrictedresources divided by operating expensesand interest, should exceed 5%. Second, maximumannual debt service divided by unrestrictedresources should be less than 50%. In Standard &Poor’s view, meeting these two ratios demonstratesenough liquidity to mitigate the absence of a debtservice reserve.Rating Community College DebtAs the role of community colleges has expandedover the past decade, enrollment growth andimproved state support have resulted in increasedcreditworthiness for these institutions.Community colleges have developed along thesame lines as public four-year institutions. However,while public colleges and universities look much thesame from state to state, community colleges existin many different forms.In some states, community colleges fall under theresponsibility of large flagship universities. Otherstates have less centralized systems, whereby individualcommunity college districts have beenformed that resemble independent school districts.Other structures include a state board of educationthat oversees activities of community colleges, inmuch the same way as a state board of regents governsfour-year institutions. Finally, some states donot even have community colleges, but, rather, electto offer technical and vocational classes throughtheir four-year institutions.The wide array of structures has led to debtbeing issued under a variety of security pledges. It isthis variety of security pledges, rather than any realdifferences in debt-repayment ability, that hasresulted in the ratings on community college debtbeing spread across the spectrum, from potentiallya ‘AAA’ where debt is secured general obligationsor ad valorem tax revenues to the ‘BBB’ category.Most community colleges are supported by threemain revenue sources:■ Local ad valorem property taxes;■ State appropriations; and■ Tuition and fees.These income streams can be pledged individuallyor in combination to create numerous securitypledges. The most common pledges, in descendingorder from broadest and most creditworthy to narrowest,include:■ A GO pledge of all of the school or district’sresources, including ad valorem property taxes;■ A pledge of tuition or tuition and fees, excludingproperty tax support;■ A pledge of one or more unlimited student fees,excluding tuition and property tax support; and■ A pledge of auxiliary (dormitory, dining hall,parking) revenues.Depending on the underlying security, ratingsassigned to the debt of a single community college,or district, could vary from one issue of bonds toanother. Community college revenue bonds aretypically rated below GO bonds, depending on thebreadth of the pledged revenues. Issues secured bytuition and fees, and other enterprise revenuesmight be rated higher than revenue bonds securedsolely by enterprise revenues of the community college.All ratings still take into account the communitycollege’s financial performance and othercredit characteristics.184 Standard & Poor’s Public Finance Criteria 2007
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2007Public FinanceCriteria
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Published by Standard & Poor’s, a
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ContentsI. IntroductionIntroduction
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IntroductionIntroduction To Public
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Introduction To Public Finance Crit
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Cross Sector CriteriaShort-Term Deb
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Short-Term Debtissue in the event o
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Short-Term DebtCash Flow Note Pools
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Commercial Paper, VRDO, And Self-Li
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Bank Liquidity Facilitiesthat immed
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Municipal Swapsoccurrence of the au
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Municipal Swapspurchased a swaption
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Municipal Swapsrisk, but gives the
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Municipal Swapscharges. An issuer t
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Municipal Swapsmeasures the potenti
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Debt Derivative Profile ScoresDue t
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Debt Derivative Profile ScoresOf th
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Long-Term Municipal Poolsexposure,
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Long-Term Municipal Poolsthe progra
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Long-Term Municipal Poolsand assets
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Investment GuidelinesThe proceeds f
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Investment GuidelinesEligible Inves
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Investment Agreements For Municipal
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Joint Support To Investment Agreeme
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DefeasanceDefeasanceStandard & Poor
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Defeasanceexisting rating on the ob
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GO Debtkey role in economic develop
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GO Debtchanging. Increases in net a
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GO Debtthe Financial management Ass
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Debt Statement AnalysisWith this ag
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Debt Statement AnalysisHowever, swa
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Special Tax Bondsis dedicated only
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Special Tax BondsAdditional bonds t
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Non Ad Valorem BondsNon Ad Valorem
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Lottery Revenue BondsLottery Manage
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Special-Purpose DistrictsTax Increm
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Special-Purpose DistrictsQuestions
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Special-Purpose Districtsatical in
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Special-Purpose Districts■ Cash f
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State Credit Enhancement Programsce
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State Credit Enhancement Programsfi
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State Credit Enhancement ProgramsPu
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State Credit Enhancement Programsde
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State Credit Enhancement Programsth
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State Credit Enhancement ProgramsNe
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State Credit Enhancement Programsan
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State Credit Enhancement Programstr
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Appropriation-Backed Obligationscie
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Appropriation-Backed Obligationsand
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Federal LeasesFederal LeasesPrivate
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Federal Leasesis important to make
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Moral Obligation BondsMoral Obligat
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General Government UtilitiesWater A
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Water And Sewer RatingsLastly, Stan
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Water And Sewer Ratings■■also r
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Water And Sewer Ratingsdebt service
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Electric Utility Ratingstherefore c
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Electric Utility Ratingsits viabili
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Electric Utility Ratingsfor systems
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Solid Waste System Financingsyears.
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Solid Waste System Financingsmitiga
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TransportationAirport Revenue Bonds
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Page 136 and 137: Airport Revenue BondsDemand informa
Page 138 and 139: Stand-Alone Passenger Facility Char
Page 140 and 141: Airport Multi-Tenant Special Facili
Page 142 and 143: Airport Multi-Tenant Special Facili
Page 144 and 145: Port Facilities Revenue Bondsincrea
Page 146 and 147: Toll Road And Bridge Revenue BondsT
Page 148 and 149: Toll Road And Bridge Revenue BondsN
Page 150 and 151: Mass Transit Bonds Secured By Fareb
Page 152 and 153: Parking Revenue BondsParking Revenu
Page 154 and 155: Health CareNot-For-Profit Health Ca
Page 156 and 157: Not-For-Profit Health Careconcerns.
Page 158 and 159: Not-For-Profit Health Caregroup, St
Page 160 and 161: Not-For-Profit Health CareLegal Rev
Page 162 and 163: Not-For-Profit Health CareStandard
Page 164 and 165: Senior Livingsystem’s credit stan
Page 166 and 167: Senior LivingLegal CriteriaStandard
Page 168 and 169: Senior Livinging” criteria may ap
Page 170 and 171: Physician Groups And Faculty Practi
Page 172 and 173: Physician Groups And Faculty Practi
Page 174 and 175: Human Service Providerswhich can di
Page 176 and 177: Education And Non-Traditional Not-F
Page 178 and 179: Higher EducationProgram offerings.
Page 180 and 181: Higher EducationRisk managementStan
Page 182 and 183: Higher Educationa general obligatio
Page 186 and 187: Higher EducationThe revenue pledgeT
Page 188 and 189: Higher Educationtial demand for hou
Page 190 and 191: Higher Education■■The project i
Page 192 and 193: Private Elementary And Secondary Sc
Page 194 and 195: Private Elementary And Secondary Sc
Page 196 and 197: Charter Schoolsan impartial legal f
Page 198 and 199: Charter Schoolsstates are not alway
Page 200 and 201: Charter Schoolsauthorizer have guid
Page 202 and 203: Non-Traditional Not-For-Profitsconv
Page 204 and 205: Non-Traditional Not-For-ProfitsCult
Page 206 and 207: Non-Traditional Not-For-Profitspara
Page 208 and 209: Municipal Structured FinanceIntrodu
Page 210 and 211: Introduction To Structured Financea
Page 212 and 213: Introduction To Structured FinanceC
Page 214 and 215: Introduction To Structured Financei
Page 216 and 217: Introduction To Structured FinanceL
Page 218 and 219: Municipal Applications For Joint Su
Page 224 and 225: Forward Purchase Contracts And ‘A
Page 226 and 227: Secondary Market Derivative Product
Page 232 and 233: Single-Family Whole Loan Programsth
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Single-Family Whole Loan ProgramsTh
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Single-Family Whole Loan Programspo
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Single-Family Whole Loan ProgramsA3
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Single-Family Whole Loan ProgramsTa
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Single-Family Whole Loan ProgramsRe
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Single-Family Second Mortgage Loans
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Single-Family Mortgage-Backed Secur
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Property Improvement LoansCertain o
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Property Improvement Loansunder a s
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FHA Insured Multifamily MortgagesMo
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FHA Insured Multifamily Mortgagesth
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FHA Insured Multifamily Mortgagesda
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FHA Insured Multifamily MortgagesHF
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Ginnie Mae, Fannie Mae, And Freddie
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Ginnie Mae, Fannie Mae, And Freddie
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Unenhanced Affordable Housing Proje
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Affordable Multifamily Housing Pool
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Military Housing Privatizations■
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Military Housing Privatizationsimpa
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Federally Subsidized Housing Progra
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Federally Subsidized Housing Progra
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Public Housing Authority Debtinvest
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Public Housing Authority Debtthe PH
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Public Housing Authority Debtto pay
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Housing Finance AgenciesKey financi
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Housing Finance AgenciesIn many ins
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Bond Insurancenet losses will occur
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Bond Insuranceing; the durability o
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Bond Insurancereinsurance as descri
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Bond Insurancepaying resources. The
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Bond Insurancethe terms of the enga
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Bond InsuranceTable 6 U.S. Municipa
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Bond Insuranceinvolves a formal bus
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Bond Insuranceyears of the modeling
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Bond Insurancemargin of safety meas
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Government Investment Pool(NAV) to
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Government Investment Poolon an ove
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Government Investment Pooland $1.00
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Government Investment Poolsevere in
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Government Investment PoolVariable
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Assessing Construction RiskInterest
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Assessing Construction Riskelect to
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Pension Fund Credit Enhancement And
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Public Pension FundsPublic Pension
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Public Pension Funds■■Operating
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Public Pension Fundscompensation ag
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