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

Long-Term Municipal Poolsand assets that provides the dominant support formost state revolving fund ratings. In such a caseStandard & Poor’s analysis would expand toinclude not only the asset quality and liquidity ofrelated funds, but also overall program income andbalance sheet performance, including non-leveragedprogram areas. Management practices, state-specificregulations, and statewide economic conditionscould also play a larger role in these instances.Other Municipal Public Purpose PoolsA variety of pool financing programs have beenestablished over the years to help local governmentsfund various types of improvements. Some programsfocus on specific types of projects, others onspecific types of organizations; some are instrumentalitiesof states, while others are single-purposeorganizations supported by quasi-governmental orother organizations dedicated to serving local governmententities. Each type of organization can playan important role within the context of a state’spublic safety, economic development, or other publicinterest needs.The state-sanctioned municipal bond bank structurebegan in the late 1960s, and through a varietyof names state bond banks have offered varied programsover the past 35 years. Although the numberof bond banks has not risen substantially, manyhave seen a significant evolution and expansion oftheir programs. While the security and structure ofbond bank pools varies considerably, these poolstypically benefit from the fact that a state agencyadministers the program; this often brings strongeroversight powers or special security features containedin statutes. Bond banks may be more willingor more able than nonprofit or quasi-governmentalentities to cure program imbalances if shortfallsoccur. Relative to state revolving fund programs,however, bond banks may be more susceptible tochanges in levels of state support.Quasi-governmental pools are typically sponsoredor administered by state level organizationsTable 2 Example Of Applied Default And Recovery Rate For Municipal PoolAssume pool default rate of 40%, with 90% recovery after four yearsA B C D E F GPayments Recovery Net Defaulted(due to be Default rate (%) rate (%) default Defaulted debtreceived before Debt 25% of 40% Four-year rate (%) payments ($) service ($)Year defaults) ($) service ($) each year recovery lag (C–D) (E–A) B–(A–F)1 5,000,000 4,000,000 10 N/A 10 500,000 N/A2 5,000,000 4,000,000 20 N/A 20 1,000,000 N/A3 5,000,000 4,000,000 30 N/A 30 1,500,000 500,0004 5,000,000 4,000,000 40 N/A 40 2,000,000 1,000,0005 5,000,000 4,000,000 40 9 31 1,550,000 550,0006 5,000,000 4,000,000 40 18 22 1,100,000 100,0007 5,000,000 4,000,000 40 27 13 650,000 N/A8 5,000,000 4,000,000 40 36 4 200,000 N/A9 5,000,000 4,000,000 40 36 4 200,000 N/A10 5,000,000 4,000,000 40 36 4 200,000 N/A11 5,000,000 4,000,000 40 36 4 200,000 N/A12 5,000,000 4,000,000 40 36 4 200,000 N/A13 5,000,000 4,000,000 40 36 4 200,000 N/A14 5,000,000 4,000,000 40 36 4 200,000 N/A15 5,000,000 4,000,000 40 36 4 200,000 N/A16 5,000,000 4,000,000 40 36 4 200,000 N/A17 5,000,000 4,000,000 40 36 4 200,000 N/A18 5,000,000 4,000,000 40 36 4 200,000 N/A19 5,000,000 4,000,000 40 36 4 200,000 N/AN/A—Not applicablewww.standardandpoors.com47