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

Tax-Secured Debtthe absence of earthquake insurance, leased assetswill need to pass Standard and Poor’s seismic riskscreening model. The leases will also need to containprovisions whereby the CaliforniaInfrastructure Bank is required to actively monitorinsurance in force and take action if it appears acasualty insurance policy is about to expire. Theleases will also need to require two years’ worth ofbusiness interruption insurance. Associated indenturesare expected to require a debt service reserveequal to the lesser of maximum annual debt service,10% of the par amount of bond issuance, or 125%of average annual debt service. The leases will alsorequire maintenance and operations expenses forthe leased assets to be paid by the participatingschool districts.Standard & Poor’s requires at least 2x coverageof annual lease payments by state aid in order tomaintain the program rating upon the initial rating.Colorado State Aid Intercept Program (‘AA-’)Governing statutes: House Bill 1214 created a stateaid withholding program to provide credit enhancementfor Colorado school district bonds. Based onthe provisions of this law, Section 22-41-110 ofColorado Revised Statutes, school districts mustapply to the state to use this program as bond security.This rating moves with that of the state.Eligibility requirements: Eligible financingsinclude GO bonds issued by a school district on, orafter, July 1, 1991, as well as electorate-approved,non-terminable leases and installment contracts. Toqualify bonds for the program, a school districtmust file an issuance resolution, a copy of the bondoffering document, and its agreement with an independentpaying agent. In 1997, the state clarifiedthat it will cover debt service payments even if itdetermines that a district is unlikely to repay theadvanced funds. Therefore there is no requirementthat existing state aid cover future maximum annualdebt service as long as it is expected that districtwill continue to participate in the withholding programand be eligible for future state equalization.Program provisions: If a paying agent has notreceived a debt service payment by the business daybefore the due date, the agent will notify the statetreasurer and the school district. After notification,the state treasurer will contact the school district todetermine whether payment will be made. If thedistrict cannot make the payment, the state treasurerwill forward the amount necessary in immediatelyavailable funds to the paying agent to be appliedonly to debt service, even if the state determines itis unlikely to be repaid in full by the district’s availablestate aid under Article 53 over the following12 months.The state treasurer’s policy stipulates that paymentwill be made by 1 p.m. on the due date toallow for timely payment to bondholders. Uponpayment by the state, the state treasurer will notifythe department of education, chief financial officerof the school district, and General Assembly. Thedepartment of education will initiate an audit todetermine the reason for nonpayment and, if necessary,develop control measures that will preventfuture nonpayment.Georgia State Aid Intercept Program(‘AA+’ or ‘A’ depending on legal protections)Governing statutes: Georgia’s voluntary state aidintercept program authorized by House Bill 792 in1991, allows the state to guarantee repayment of alocal school district’s GO bonds. Eligible financingsinclude any bonded indebtedness that the localschool district elects to have covered by the program.The AA+ rating moves with that of the state; the Aprogram will not likely move with the state’s rating.Eligibility requirements: To participate in thisprogram, a school district must, at the time of debtissuance, irrevocably authorize by resolution theState Board of Education to withhold aid paymentsfor debt service purposes when necessary.Program provisions: Under the program, the payingagent must notify the board if monies held inthe sinking fund are insufficient to make timelypayment of principal and interest no later than the15th day of the month before the scheduled debtservice payment date. Upon notification, the statetransfers to the paying agent the lesser of anamount sufficient to make the debt service payment,or the balance of any funds due the localschool district under any state education appropriationauthorized for the current fiscal year.Districts whose eligible principal and interestpayments are expected to exceed their averagemonthly state aid payment are advised by the stateagainst the selection of July 1 and Jan. 1 as the debtservice due dates.Additional Standard & Poor’s requirements:To receive a rating under the basic program,Standard & Poor’s requires minimum historicalstate aid coverage of at least 1x on maximumdebt service.Resolution based enhancements: Resolutionbased enhancements strengthen the structure of theprogram and make the program more similar tostate appropriation debt. Consequently, a schooldistrict may qualify for a rating on par with thestate’s appropriation debt if it includes certainstructural elements in its bond resolution. Anamendment to the Georgia constitution in 1996allows school districts to share in the 1% Special90 Standard & Poor’s Public Finance Criteria 2007