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Fitch Rates New York City TFA $600MM Building Aid Revs 'A+'; Outlook Stable.

NEW YORK New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
 -- Fitch Ratings Fitch Ratings

An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris.
 has assigned an 'A+' rating to the New York City New York City: see New York, city.
New York City

City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S.
 Transitional Finance Authority's (TFA TFA Teach For America
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TFA Trifluoroacetic Acid
TFA Trans Fatty Acid
TFA Two Factor Authentication (computer security authentication)
TFA Texas Forensic Association
TFA Total Fatty Acids
) $600 million building aid revenue bonds, fiscal 2009 series S-5. The bonds are scheduled to sell through negotiation the week of June 1, 2009. Fitch has also affirmed the 'A+' rating on $3.7 billion of outstanding TFA building aid revenue bonds. The Rating Outlook is Stable.

The rating is based on the credit quality of the State of New York (general obligation bonds rated 'AA-' with a Stable Outlook by Fitch), as bonds are payable from annual state appropriations of building aid. State building aid assists local school districts across the state with the cost of constructing and improving elementary and secondary education facilities. Appropriation risk is minimal given the constitutional mandate for, and strong history of, state support for education. Moreover, the additional bonds test Additional bonds test

A test for ensuring that bond issuers can meet the debt service requirements of issuing any new additional bonds.

additional bonds test 
 (ABT ABT About
ABT Abteilung (German: Department)
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ABT Availability Based Tariff
) only considers aid associated with projects that have already been approved by the State of New York, even though aid related to projects that will be approved by the state in the future is also pledged to the bonds.

In the 2006 state legislative session, the TFA was authorized to issue an amount of up to $9.4 billion outstanding for education to address the capital demands of the Campaign for Fiscal Equity The Campaign for Fiscal Equity (CFE), a not-for-profit organization based in New York City, is a coalition of parent organizations, community school boards and advocacy groups seeking to reform New York State's school finance system to ensure adequate funding of education in New  (CFE CFE Conventional Forces in Europe (treaty)
CFE Cash Flow to Equity (finance/accounting)
CFE Comisión Federal de Electricidad (México)
CFE Certified Fraud Examiner
) school funding lawsuit. As permitted by the legislation, the city assigned all of its state building aid to the TFA to secure the bonds.

State building aid, which is earned on an individual project basis, consists of confirmed building aid and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged.

Incremental cost is additional or increased cost of an item or service apart from its actual cost.
 building aid. Confirmed building aid refers to aid payable for projects that have already been approved by the state. Such aid is subject to annual state appropriation but is not subject to any additional statutory or administrative conditions or approvals. The state has covenanted that the calculation of reimbursable costs for a project will not change once the project has been approved; the level of reimbursement Reimbursement

Payment made to someone for out-of-pocket expenses has incurred.
 can change over time pursuant to a statewide formula that is calculated every year, but this ratio has been relatively stable over time. Incremental building aid refers to state building aid to be received for projects approved by the state in the future.

Both confirmed and incremental building aid are the property of the TFA and are pledged to the bonds. However, the ABT considers only confirmed building aid. In order for additional debt to be issued, confirmed building aid payable in the fiscal year preceding each year in which bonds are scheduled to be outstanding must be at least 1 times (x) debt service in that year. Since state building aid for a given project is provided over 30 years, this allows for a level debt service structure for the bonds in which coverage by confirmed building aid drops from a high of about 3.3x in fiscal 2009 to a low of about 1x in fiscal 2038. Fitch expects that the incremental building aid generated by the city's ongoing education capital program will result in substantially higher actual coverage in the outyears. The average state reimbursement rate for education projects in the city currently is about 50%, and the TFA receives all building aid regardless of whether the project is financed with TFA building aid bonds or through a different financing mechanism.

Pursuant to the TFA indenture, since building aid is TFA revenue it must be available first to TFA future tax secured bonds issued prior to the first issuance of building aid revenue bonds. Given the very strong coverage that the pledged personal income and sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government.  revenues provide for future tax secured bonds (about 8.4x in fiscal 2009 and remaining strong even after an additional steep drop-off in revenues expected in fiscal 2010), it is unlikely that building aid would ever be needed for this purpose. TFA future tax secured bonds sold after the date of the initial issuance of the building aid bonds have no claim on building aid.

In addition to previously outstanding TFA future tax secured bonds, the payment of building aid is also subject and subordinate to certain other prior statutory and state constitutional claims. Fitch does not believe that these will impair the ability to pay debt service. Holders of the TFA building aid bonds benefit from the statutory covenants in the original TFA Act prohibiting action that would impair bondholders and the bankruptcy-remote nature of the issuer. However, since the pledged revenue stream requires annual state appropriation, the bondholders do not enjoy the same insulation from government operations This article aims to describe the financial expenditure associated with the operations and processes of world governments of all levels. Size of economic footprint

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 that is a key factor in the 'AA+' rating of the TFA future tax-secured bonds. The issuance of the fiscal 2009 series S-5 bonds does not affect the 'AA+' rating on the future tax secured bonds.

For more information on the State of New York, see Fitch Research 'Fitch Affirms New York State GOs at 'AA-'; Outlook Stable' dated May 21, 2009.

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 of such ratings are available on the agency's public site, Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental  are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:May 29, 2009
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