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

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VI. Health CareNot-for-Profit Health Care ..............................................................................................153Senior Living ....................................................................................................................162Physician Groups and Faculty Practice Plans....................................................................169Human Service Providers..................................................................................................172VII. Education and Non-Traditional Not-for-ProfitsHigher Education ............................................................................................................175Private Elementary and Secondary Schools ......................................................................191Charter Schools ................................................................................................................194Non-Traditional Not-for Profits ......................................................................................200VIII. Municipal Structured FinanceIntroduction to Structured Finance ..................................................................................207LOC-Backed Municipal Debt ..........................................................................................208Municipal Applications for Jointly Supported Debt ........................................................217Forward Purchase Contracts and ‘AAA’ Defeased Bonds ................................................223Secondary-Market Derivative Products ............................................................................225IX. HousingIntroduction to Tax-Exempt Housing Bonds ....................................................................230Single-Family Whole Loan Programs................................................................................230Single-Family Second Mortgage Loans ............................................................................243Single Family Mortgage-Backed Securities Programs........................................................245Property Improvement Loans ..........................................................................................247FHA Insured Mortgages ..................................................................................................250Ginnie Mae, Fannie Mae, and Freddie Mac Multifamily Securities..................................259Unenhanced Affordable Housing Project Debt ................................................................262Affordable Multifamily Housing Pooled Financings ........................................................270Military Housing Privatizations........................................................................................276Federally Subsidized Housing Programs ..........................................................................281Public Housing Authority Debt ........................................................................................285Housing Finance Agencies ................................................................................................290X. Other CriteriaBond Insurance ................................................................................................................294Government Investment Pools (GIP) ................................................................................312Assessing Construction Risk ............................................................................................323Pension Fund Credit Enhancement And Related Guarantee Programs ............................327Public Pension Funds........................................................................................................329
IntroductionIntroduction To Public Finance CriteriaSince beginning its credit rating activities in 1916,Standard & Poor’s Ratings Services has ratedhundreds of thousands of securities issues, corporateand governmental issuers, and structured financings.Standard & Poor’s began its ratings activities withthe issuance of credit ratings on corporate andgovernment debt issues. Responding to marketdevelopments and needs, Standard & Poor’s hasdeveloped and innovated methodologies and criteriaand now assesses the credit quality of, and assignscredit ratings to, financial guarantees, recovery ratingsand bank loans, private placements, mortgage-andasset-backed securities, mutual funds, and the abilityof insurance companies to pay claims, and assignsmarket-risk ratings to managed funds.In 2005, Standard & Poor’s published more than500,000 ratings, including 294,000 new ratingsand 260,000 revised ratings. We have issued ratingson debt securities in more than 100 countries.Standard & Poor’s rates and monitors developmentspertaining to these securities and obligors fromoperations in 21 countries around the world.Standard & Poor’s believes that over the lastcentury credit ratings have served the U.S. securitiesmarkets extremely well, providing an effective andobjective tool in the market’s evaluation and assessmentof credit risk. Standard & Poor’s recognizesthe valuable role that credit-rating agencies playin the U.S. securities markets and is committedto protecting and enhancing the reputation andfuture of its credit-ratings business. In this regard,Standard & Poor’s takes great care to assure thatthe market views its credit ratings as highly credibleand relevant, and will continue to review its practices,policies, and procedures on an ongoing basis andmodify or enhance them, as necessary, to ensurethat rigorous analytics, integrity, independence,objectivity, transparency, credibility, and qualitycontinue as fundamental premises of its operations.Standard & Poor’s Role In The Financial MarketsStandard & Poor’s is the world’s foremost providerof independent credit ratings, indices, risk evaluation,investment research, data and information,and operates under the basic principles of:■ Independence■ Objectivity■ Credibility, and■ TransparencyStandard & Poor’s recognition as a rating agencyultimately depends on investors’ willingness toaccept its judgments. Standard & Poor’s believes itis important that all users of its ratings understandhow it arrives at its ratings opinions, and it regularlypublishes ratings definitions and detailed reports onratings criteria and methodology.Standard & Poor’s rates more than USD $34trillion in bonds and other financial obligations ofobligors in more than 100 countries. Despite thechanging environment, Standard & Poor’s corevalues remain the same-to provide high-quality,objective, value-added analytical information tothe world’s financial markets.Credit RatingsStandard & Poor’s began rating the debt of corporateand government issuers nearly 100 years ago. Sincethen, its credit rating criteria and methodology havegrown in sophistication and have kept pace withthe introduction of new financial products. Forexample, Standard & Poor’s was the first majorrating agency to assess the credit quality of, andassign credit ratings to, the claims-paying ability ofinsurance companies (1971), financial guarantees(1971), mortgage-backed bonds (1975), mutualfunds (1983), and asset-backed securities (1985).A credit rating is Standard & Poor’s opinion ofthe general creditworthiness of an obligor, or thecreditworthiness of an obligor with respect to aparticular debt security or other financial obligation,based on relevant risk factors. A rating does notconstitute a recommendation to purchase, sell, orhold a particular security. In addition, a rating doesnot comment on the suitability of an investmentfor a particular investor.Standard & Poor’s credit ratings and symbolsoriginally applied to debt securities. As describedbelow, Standard & Poor’s has developed credit ratingsthat may apply to an issuer’s general creditworthinessor to a specific financial obligation. Standard &Poor’s has historically maintained separate andwell-established rating scales for long-term andshort-term instruments. Over the years, these creditratings have achieved wide investor acceptance as6 Standard & Poor’s Public Finance Criteria 2007
Page 1 and 2: 2007Public FinanceCriteria
Page 3 and 4: Published by Standard & Poor’s, a
Page 5: ContentsI. IntroductionIntroduction
Page 10 and 11: Introduction To Public Finance Crit
Page 12 and 13: Cross Sector CriteriaShort-Term Deb
Page 14 and 15: Short-Term Debtissue in the event o
Page 16 and 17: Short-Term DebtCash Flow Note Pools
Page 18 and 19: Commercial Paper, VRDO, And Self-Li
Page 28 and 29: Bank Liquidity Facilitiesthat immed
Page 30 and 31: Municipal Swapsoccurrence of the au
Page 32 and 33: Municipal Swapspurchased a swaption
Page 34 and 35: Municipal Swapsrisk, but gives the
Page 36 and 37: Municipal Swapscharges. An issuer t
Page 38 and 39: Municipal Swapsmeasures the potenti
Page 40 and 41: Debt Derivative Profile ScoresDue t
Page 42 and 43: Debt Derivative Profile ScoresOf th
Page 44 and 45: Long-Term Municipal Poolsexposure,
Page 46 and 47: Long-Term Municipal Poolsthe progra
Page 48 and 49: Long-Term Municipal Poolsand assets
Page 50 and 51: Investment GuidelinesThe proceeds f
Page 52 and 53: Investment GuidelinesEligible Inves
Page 54 and 55: Investment Agreements For Municipal
Page 56 and 57:
Joint Support To Investment Agreeme
Page 58 and 59:
DefeasanceDefeasanceStandard & Poor
Page 60 and 61:
Defeasanceexisting rating on the ob
Page 62 and 63:
GO Debtkey role in economic develop
Page 64 and 65:
GO Debtchanging. Increases in net a
Page 66 and 67:
GO Debtthe Financial management Ass
Page 68 and 69:
Debt Statement AnalysisWith this ag
Page 70 and 71:
Debt Statement AnalysisHowever, swa
Page 72 and 73:
Special Tax Bondsis dedicated only
Page 74 and 75:
Special Tax BondsAdditional bonds t
Page 76 and 77:
Non Ad Valorem BondsNon Ad Valorem
Page 78 and 79:
Lottery Revenue BondsLottery Manage
Page 80 and 81:
Special-Purpose DistrictsTax Increm
Page 82 and 83:
Special-Purpose DistrictsQuestions
Page 84 and 85:
Special-Purpose Districtsatical in
Page 86 and 87:
Special-Purpose Districts■ Cash f
Page 88 and 89:
State Credit Enhancement Programsce
Page 90 and 91:
State Credit Enhancement Programsfi
Page 92 and 93:
State Credit Enhancement ProgramsPu
Page 94 and 95:
State Credit Enhancement Programsde
Page 96 and 97:
State Credit Enhancement Programsth
Page 98 and 99:
State Credit Enhancement ProgramsNe
Page 100 and 101:
State Credit Enhancement Programsan
Page 102 and 103:
State Credit Enhancement Programstr
Page 104 and 105:
Appropriation-Backed Obligationscie
Page 106 and 107:
Appropriation-Backed Obligationsand
Page 108 and 109:
Federal LeasesFederal LeasesPrivate
Page 110 and 111:
Federal Leasesis important to make
Page 112 and 113:
Moral Obligation BondsMoral Obligat
Page 114 and 115:
General Government UtilitiesWater A
Page 116 and 117:
Water And Sewer RatingsLastly, Stan
Page 118 and 119:
Water And Sewer Ratings■■also r
Page 120 and 121:
Water And Sewer Ratingsdebt service
Page 122 and 123:
Electric Utility Ratingstherefore c
Page 124 and 125:
Electric Utility Ratingsits viabili
Page 126 and 127:
Electric Utility Ratingsfor systems
Page 128 and 129:
Solid Waste System Financingsyears.
Page 130 and 131:
Solid Waste System Financingsmitiga
Page 132 and 133:
TransportationAirport Revenue Bonds
Page 134 and 135:
Airport Revenue Bondsports can be v
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 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 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 220 and 221:
Page 222 and 223:
Page 224 and 225:
Forward Purchase Contracts And ‘A
Page 226 and 227:
Secondary Market Derivative Product
Page 228 and 229:
Page 230 and 231:
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
Page 256 and 257:
FHA Insured Multifamily Mortgagesda
Page 258 and 259:
FHA Insured Multifamily MortgagesHF
Page 260 and 261:
Ginnie Mae, Fannie Mae, And Freddie
Page 262 and 263:
Ginnie Mae, Fannie Mae, And Freddie
Page 264 and 265:
Unenhanced Affordable Housing Proje
Page 266 and 267:
Page 268 and 269:
Page 270 and 271:
Page 272 and 273:
Affordable Multifamily Housing Pool
Page 274 and 275:
Page 276 and 277:
Page 278 and 279:
Military Housing Privatizations■
Page 280 and 281:
Military Housing Privatizationsimpa
Page 282 and 283:
Federally Subsidized Housing Progra
Page 284 and 285:
Federally Subsidized Housing Progra
Page 286 and 287:
Public Housing Authority Debtinvest
Page 288 and 289:
Public Housing Authority Debtthe PH
Page 290 and 291:
Public Housing Authority Debtto pay
Page 292 and 293:
Housing Finance AgenciesKey financi
Page 294 and 295:
Housing Finance AgenciesIn many ins
Page 296 and 297:
Bond Insurancenet losses will occur
Page 298 and 299:
Bond Insuranceing; the durability o
Page 300 and 301:
Bond Insurancereinsurance as descri
Page 302 and 303:
Bond Insurancepaying resources. The
Page 304 and 305:
Bond Insurancethe terms of the enga
Page 306 and 307:
Bond InsuranceTable 6 U.S. Municipa
Page 308 and 309:
Bond Insuranceinvolves a formal bus
Page 310 and 311:
Bond Insuranceyears of the modeling
Page 312 and 313:
Bond Insurancemargin of safety meas
Page 314 and 315:
Government Investment Pool(NAV) to
Page 316 and 317:
Government Investment Poolon an ove
Page 318 and 319:
Government Investment Pooland $1.00
Page 320 and 321:
Government Investment Poolsevere in
Page 322 and 323:
Government Investment PoolVariable
Page 324 and 325:
Assessing Construction RiskInterest
Page 326 and 327:
Assessing Construction Riskelect to
Page 328 and 329:
Pension Fund Credit Enhancement And
Page 330 and 331:
Public Pension FundsPublic Pension
Page 332 and 333:
Public Pension Funds■■Operating
Page 334 and 335:
Public Pension Fundscompensation ag
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