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

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Non-Traditional Not-For-Profitsparamount importance. Standard & Poor’srequests at least five years of historical financialdata and asks for portfolio and endowment datasuch as quarterly board reports.In evaluating endowment, Standard & Poor’slooks beyond size at a number of specific factors,including:■ Growth in endowment assets over time;■ Asset allocation policies and quality of the investmentpool, and a comparison to targeted investmentmix;■ Historical rates of return compared to broadermarket or customized benchmarks;■ Relative liquidity and availability of the portfolio;■ Endowment spending policies; and■ Restrictions on use of earnings and principal.Since the endowment is the basis for any ratingof an endowed organization, Standard & Poor’smay require legal covenants restricting the foundation’suse of its endowment. Generally, restrictionsmandate liquidity and asset coverage tests, andlimit additional debt issuance.While the above analysis focuses primarily onthe balance sheet, foundation mission, activities,and budgetary flexibility are also important. Todate, rated foundations tend to fall into one oftwo categories—independent or grantmaking andoperating. Although, one type is not necessarilymore creditworthy than the other, grantmakingentities may have more budgetary flexibility thanoperating foundations that actually run their owncharitable programs. Standard & Poor’s is particularlyinterested in the type of activity supportedby a foundation and the extent to which it cancurtail this support and control operating costs.Once started, Standard & Poor’s assumes thatcertain programs or foundation giving would bedifficult to stop, particularly if the foundation isthe sole sponsor.Research InstitutionsWhile nonprofit research institutions abound, thosemost capable of achieving investment-grade ratingsgenerally have a long history of working with agovernmental agency, or have a medium-to-highlevel of endowment. Despite their close ties to governmentsor sponsors, research organizations oftenface considerable credit risks, including contractnonrenewal and cyclical support for the type ofresearch being sponsored. Because of these risks,small institutions in a single competitive field, or ina field with a low funding priority, are more likelyto receive lower ratings.As with most areas of credit analysis, Standard &Poor’s reviews industry information to assess a nonprofitresearch organization. Specific governmentalcontracts are needed if the institution is operatingunder an especially large or long-term contract thatprovides the bulk of its operating income.Management meetings might include not only theinstitution’s management, but also large sponsors togauge ongoing support for the organization.Standard & Poor’s considers the following factorsto be particularly applicable when ratingresearch institutions:■ History of research programs and dollar amountof funding;■ Areas of research specialization and competition;■ Growth in the number of contracts and funding;■ Diversity of research—both classified and unclassified;■ Indirect cost recovery rates currently in place andtimetable for renegotiation■ Funding stability—options for contract renewal ifless than five years to termination dates; and■ Budgetary flexibility and the capacity to downsize.Other lines of inquiry go beyond the research programand include an evaluation of management,financial operations and resources, and debt burdenas previously discussed. Like membership organizations,Standard & Poor’s expects rated institutions toinclude permanent staff whose functions includefinancial management and day-to-day operations.Most research institutions rated by Standard &Poor’s are financially and operationally autonomous;however, any ties to a parent organization wouldinvolve an analysis of this relationship. Researchinstitutions receiving federal funds for research havean incentive to issue tax-exempt debt for facilities.These organizations can include the costs of facilitiescapital in their requests for reimbursement. Formany of them, being able to recoup the cost of capitalmakes debt a more favorable option than leasingresearch facilities.Bondholder security for debt issued by theseorganizations is typically a GO of the institution,but for many research organizations, direct andindirect costs of research are the primary sources ofRelevant Statistics for Research Institutions■ History of research programs and funding■ Areas of research specialization and competition■ Growth in the number of contracts, funding levels, andrate of indirect cost recoveries■ Diversity of research-both classified and unclassified■ Funding stability-options for contract renewal if less thanfive years to termination dates■ Budgetary flexibility and the capacity to downsizewww.standardandpoors.com205
Education And Non-Traditional Not-For-Profitsoperating revenue. While research funding hasbecome increasingly competitive, and there ispotential for continued changes in reimbursementmechanisms, research funding in general is provingto be a stable source of reimbursement andrevenue for research institutions. Rate covenantsgenerally carry little weight in legal provisions,since these organizations do not have the ability toadjust their rates to federal or other sponsors onan annual basis. However, additional bonds testscarry more weight, and historical additional bondstests add comfort that historical revenues have atleast been sufficient to pay for the current andproposed debt. ■206 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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Airport Revenue Bondsports can be v
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Airport Revenue BondsDemand informa
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Stand-Alone Passenger Facility Char
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Airport Multi-Tenant Special Facili
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Airport Multi-Tenant Special Facili
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Port Facilities Revenue Bondsincrea
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Toll Road And Bridge Revenue BondsT
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Toll Road And Bridge Revenue BondsN
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Mass Transit Bonds Secured By Fareb
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Parking Revenue BondsParking Revenu
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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 184 and 185: Higher EducationSelected Public Col
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 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
Page 234 and 235: Single-Family Whole Loan ProgramsTh
Page 236 and 237: Single-Family Whole Loan Programspo
Page 238 and 239: Single-Family Whole Loan ProgramsA3
Page 240 and 241: Single-Family Whole Loan ProgramsTa
Page 242 and 243: Single-Family Whole Loan ProgramsRe
Page 244 and 245: Single-Family Second Mortgage Loans
Page 246 and 247: Single-Family Mortgage-Backed Secur
Page 248 and 249: Property Improvement LoansCertain o
Page 250 and 251: Property Improvement Loansunder a s
Page 252 and 253: FHA Insured Multifamily MortgagesMo
Page 254 and 255: 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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