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

State Credit Enhancement ProgramsNew York State Aid Intercept Program (‘A’)Governing statute: Section 99b of the state financelaw authorizes the aid withholding and specifies theprocedures that would be followed should the statebe required to make a debt service payment for aprogram participant. This rating will not typicallymove with that of the state.Eligibility requirements: All school districts areeligible for this program.Program provisions: Upon notification of a defaultby a school district, the state comptroller is requiredto deduct from the next state aid payment due to theschool district an amount sufficient to meet any deficiencyin debt service. If this aid payment does notcover the obligation, the balance would be deductedfrom the succeeding allotment. The funds would beforwarded directly to the paying agent, and thecomptroller would notify the school district of thepayment. A technical default can occur on New Yorkschool district GO bonds, as the state finance lawcontains no provisions to activate the mechanismbefore actual default. However, the minimum guaranteeprogram reflects the fact that a prompt cure ofany such default is assured.Additional Standard & Poor’s requirements: Aschool district’s annual state aid must cover maximumannual debt service by at least 1x.Ohio State Aid Intercept Program (‘AA’ or ‘AA-’ ratingdepending on required coverage levels)Governing statute: Pursuant to section 3317.18 ofthe Ohio Revised Code and section 3301-8-01 ofthe Ohio Administrative Code, the Ohio CreditEnhancement Program lets a school district enterinto an agreement that allows the state to withholdstate education funds due to the district underchapter 3317 of the revised code and apply thosefunds to the district’s debt service payments. Section3301-8-01 of the Ohio Administrative Code wasrevised in March 2004 to require 2.5x maximumannual debt service coverage levels. Prior to thattime, the required coverage under the program was1.25x. The ratings on bonds secured by the priorversion of the enhancement program will be evaluatedon a case-by-case basis, and issues that meetthe Standard & Poor’s requirement of 2x maximumannual debt service coverage will be upgraded to a‘AA’ rating. Those that do not meet this coveragelevel requirement will continue to be rated ‘AA-’For bonds issued after the program was amended inMarch 2004, the ‘AA’ rating applies. Both ratingsmove with the state’s rating.Eligibility requirements: To be eligible, a districtmust meet all program criteria including having theapproval of both the state department of educationand the office of budget and management to use thesecurity. Districts applying for inclusion in the programmust provide financial information to thedepartment of education and the office of budgetand management, including assessed value and taxpayerconcentration information, audits and budgets,and schedules of proposed and outstandingdebt. The program excludes noninvestment-graderated issuers and requires an extensive review of thecredit quality of unrated districts. The district musthave an underlying credit rating determination byStandard & Poor’s. Upon state approval, the contractbetween the state and local school district isirrevocable as long as any program debt is outstanding.At the time of state approval for programparticipation, projected state aid for the current fiscalyear must be at least 2.5x the maximum annualdebt service on the enhanced debt. In addition, oneach debt service date during the current or anysubsequent fiscal year, projected state aid remainingfor that year must cover the remaining debt servicefor the year by 1.25x.Program provisions: The district must certify tothe state department of education and the payingagent whether or not it can make its full debt servicepayment 15 days before each debt service duedate. Ten business days before the due date, the districtmust deposit with the paying agent an amountsufficient to make the debt service payment. If thedistrict has failed to make a sufficient deposit, thepaying agent will immediately contact the statedepartment of education. In the event a district isunable to make a sufficient debt service paymentand the payment will not be made by a creditenhancement facility, the department of educationwill pay the paying agent the lesser of the amountof the debt service due or the amount of state aiddue to the district for the remainder of the fiscalyear. This payment will be made at least one businessday prior to the debt service payment date.Oregon School Bond Guarantee Program (‘AA-’)Governing statute: The Oregon legislature passedthe school bond guaranty act in 1997 (OregonLaws 1997, chapter 614). This rating will move inconjunction with that of the state.Eligibility requirements: Participation in the programis voluntary and open to all common schooldistricts, union high school districts, education servicedistricts, and community college districts in the state.Program provisions: The amount of debt that canbe guaranteed by the state at any one time is limitedto 0.5% of true cash value of taxable property inthe state. The program is administered by theOregon State Treasury, which has establishedadministrative rules prescribing application proceduresand qualification guidelines. Upon determinationof a district’s eligibility, the state treasurer issuesa certificate of qualification valid for one year fromwww.standardandpoors.com97