weekly credit outlook for public finance - november 8, 2013.pdf

7/27/2019 Weekly Credit Outlook for Public Finance - November 8, 2013.pdf

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MOODYS.CO

NOVEMBER 7, 201

FEATURE ARTICLESStockton, CA Approves Sales Tax Increase, Clearing Hurdle inBankruptcy Exit

The green light for the bump to 9% from 8.25% clears a major hurdle onthe citys path to exiting bankruptcy. A no-vote could have ratcheted uppressure on bond insurers to renegotiate less favorable terms withthe city.

2

Scranton, PA $20 Million Budget Gap Increases Default Risk

Without an approved balanced budget, two financial institutions are

likely to withdraw from planned debt financings. The resulting liquiditysqueeze would leave few options, raising the threat of a citydefault or bankruptcy.

3

Illinois Improved Pension Liability Does Not Outweigh Failure toEnact Reforms

Preliminary valuations for five Illinois retirement systems showreductions in Moodys-adjusted net pension liability (ANPL) by $16.6billion. Still, state inaction on benefit reforms leaves severe pensiondeficits as the main credit pressure for Illinois, the lowest-rated US state.

5

Loss of Federal Education Grants Would Be Credt Negative forCalifornia School Districts

The US Department of Education has warned the California State Boardof Education that state legislation suspending standardized testing

violates federal law, potentially costing the state at least $3.5 billion infederal funds

7

Virginia Supreme Court Ruling Is Credit Positive for the State

The courts ruling that tolls to fund a $2 billion tunnel are a user fee, nota tax, looks to continue public-private partnerships to finance a massiveinfrastructure plan. A tax can only be levied by the state legislature andresidents had used that as the basis for opposition to the financing plan.

9

Monetization of University Property Can Benefit Both Townand Gown

North Carolina State is selling 79,000 acres for $150 million, the latest ina trend of universities looking to monetize land and real estate assets.The deals can bolster school finances and bring more tax dollars forlocal governments.

11

CREDIT IN DEPTHNew Jersey Municipalities Benefit from Post-Sandy State andFederal Aid

Superstorm Sandy aftereffects continue to plague New Jerseys coastline,but we expect the credit quality of the states affected municipalities toremain intact. Federal and state aid continues to alleviate liquidityconstraints, while capital markets are receptive to impacted localgovernments and many have modest debt burdens.

13

RESEARCH HIGHLIGHTSState HFA Delinquencies Continue to GrowState Housing Finance Agencies continue to demonstrate solid financialperformance, even as total delinquencies and foreclosures in their single-family whole loan programs are at an all-time, mid-year high of 7.29%.

Patient Volume Declines Continue to Steer Higher Paceof Downgrades

In the third quarter of 2013, there were 10 rating downgrades and eightupgrades for not-for-profit hospitals resulting in a ratio of 1.3 to 1. Six of

the 10 downgrades were primarily due to material declines in admissions.US Airport Medians for FY 2012

Enplanement medians for US airports point to growth at the major hubairports, but overall growth was weak. We view the large hubs asbenefiting from industry re-consolidation around the traditional hub-and-spoke modelRATING CHANGE HIGHLIGHTSTorrance Memorial Medical Center (CA) Downgraded to A3;Outlook StableThe move affects $285 million in debt and reflects weak operatingperformance through the first eight months of fiscal year 2013.

Sarasota County's (FL) GOLT Upgraded to Baa1; Outlook Positive

The upgrade, which affects $76.1 million in debt, reflects the county'srecovering taxable values following several years of protracted losses.

Springfield, MO Board of Public Utility Upgraded to Aa2;Outlook Stable

The move affects approximately $715 million in debt and reflects theutility's prudent fiscal management.

University of Tulsa's Outlook Revised to Stable

The move affects $159 million in debt and reflects managements effortsto focus on the universitys core strengths to improve cash flow.

Franciscan Alliance's Outlook Revised to Negative; Aa3 Affirmed

The move affects $1.1 billion in bonds and reflects our concern that thinoperating cash flow may lead to a decline in unrestricted cash balances.

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2 MOODYS WEEKLY CREDIT OUTLOOK: US PUBLIC FINANCE EDITION SEPTEMBER 12,

Stockton, CA Approves Sales Tax Increase, Clearing Hurdle In Bankruptcy Exit

On November 5,Stockton, California(Ca negative) voters approved raising the citys sales tax from 8.25%to 9%, clearing a major hurdle on the citys path to exiting bankruptcy. The vote is credit positive for theCalifornia city as the additional sales tax revenue ($296 million over 10 years) increases the likelihood its

reorganization plan will be approved by the bankruptcy court. It is also a credit positive for municipal bondinsurers,National Public Financial Guarantee Corp.(Baa1 positive),Assured Guaranty Municipal Corp.(Astable) and Ambac (unrated), who could have faced increased pressure to renegotiate less favorable terms witthe city.

Stocktons bond insurers are exposed to almost 90% of the citys outstanding General Fund debt. Insurers oStocktons $121.8 million in series 2007 A and B pension obligation bonds (Ca negative) face losses weestimate to be as high as 60 cents on the dollar. Insurers of its $11.3 million in Series 2006 lease revenuebonds (Caa3 developing) stand to receive full repayment under the exit plan, and insurers of unrated leaserevenue debt face losses ranging from 22% to 0%.

The improved chances for a plan confirmation mean that adjusted net pension liabilities managed by theCalifornia Public Employees' Retirement System(CalPERS, Aa3 stable)will likely remain untouched.Stockton has opted not to pursue cutting pension liabilities as a way to ease its financial burden. Moodysestimates Stocktons adjusted net pension liability (ANPL) at approximately $500 million, or 285% of FY2011 operating revenue. In contrast, total General Fund supported debt of $295 million is 169% ofoperating revenue.

CalPERS, which manages Stocktons pension plans, has aggressively litigated against potential adjustments tpensions in California local government bankruptcy cases. Stocktons approach varies from anotherCalifornia city,San Bernardino(not rated), which stopped making payments to CalPERS for a period oftime during its own bankruptcy proceedings. San Bernardino may make an effort to restructure theseliabilities when it releases its reorganization plan later this month.

By forgoing a chance to reduce its pension obligations, Stockton leaves open the possibility that the liabilitie

could continue to plague the citys finances long after a bankruptcy exit. This seems to be happening toVallejo, California(unrated), which is struggling to balance its budget.

Stockton issued its plan of adjustment on October 3.The city estimates that when fully implemented, thesales tax revenues will begin generating approximately $28 million in fiscal 2015, giving it a surplus of $9million and total General Fund balance of $18 million. The plan relies on the fund balance to financeprojected operating deficits until fiscal 2023.

For insurers of the citys pension obligation and Series 2006 bonds, the passage of the referendum clears theway for court confirmation of the restructuring plan. A bankruptcy plan goes through if all parties agree onthe plan. But if one creditor objects, the debtor (Stockton in this case) can move for a cram down. Then, inorder to gain court approval, the debtor must show that its plan meets a fair and equitable standard and

treats all similar classes of claims alike with no class receiving property or remuneration before anothercreditor senior to it does.

Stockton had argued without the extra revenue from the sales tax it would have to undertake additionalunspecified cuts to personnel and services. Its ability to make those cuts is questionable, however, given thatthe bankruptcy court has opined that the city is not only cash-flow insolvent, but service insolvent. Thecourt could turn down a plan for further service cuts that would leave the city unable to provide corefunctions, like public safety.

Gregory W. LipitzVice President - Senior Credit Officer

[email protected]
https://www.moodys.com/credit-ratings/Stockton-City-of-CA-credit-rating-600005706https://www.moodys.com/credit-ratings/Stockton-City-of-CA-credit-rating-600005706https://www.moodys.com/credit-ratings/Stockton-City-of-CA-credit-rating-600005706https://www.moodys.com/credit-ratings/National-Public-Finance-Guarantee-Corp-credit-rating-777400https://www.moodys.com/credit-ratings/National-Public-Finance-Guarantee-Corp-credit-rating-777400https://www.moodys.com/credit-ratings/National-Public-Finance-Guarantee-Corp-credit-rating-777400https://www.moodys.com/credit-ratings/Assured-Guaranty-Municipal-Corp-credit-rating-278085https://www.moodys.com/credit-ratings/Assured-Guaranty-Municipal-Corp-credit-rating-278085https://www.moodys.com/credit-ratings/Assured-Guaranty-Municipal-Corp-credit-rating-278085https://www.moodys.com/credit-ratings/California-Public-Employees-Retirement-System-credit-rating-806775338https://www.moodys.com/credit-ratings/California-Public-Employees-Retirement-System-credit-rating-806775338https://www.moodys.com/credit-ratings/San-Bernardino-City-of-CA-credit-rating-600028141https://www.moodys.com/credit-ratings/San-Bernardino-City-of-CA-credit-rating-600028141https://www.moodys.com/credit-ratings/San-Bernardino-City-of-CA-credit-rating-600028141https://www.moodys.com/credit-ratings/Vallejo-City-of-CA-credit-rating-600005975https://www.moodys.com/credit-ratings/Vallejo-City-of-CA-credit-rating-600005975https://www.moodys.com/credit-ratings/Vallejo-City-of-CA-credit-rating-600005975https://www.moodys.com/credit-ratings/San-Bernardino-City-of-CA-credit-rating-600028141https://www.moodys.com/credit-ratings/California-Public-Employees-Retirement-System-credit-rating-806775338https://www.moodys.com/credit-ratings/Assured-Guaranty-Municipal-Corp-credit-rating-278085https://www.moodys.com/credit-ratings/National-Public-Finance-Guarantee-Corp-credit-rating-777400https://www.moodys.com/credit-ratings/Stockton-City-of-CA-credit-rating-600005706


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3 MOODYS WEEKLY CREDIT OUTLOOK: US PUBLIC FINANCE EDITION NOVEMBER 7,

Scranton, PA $20 Million Budget Gap Increases Default Risk

With a November 15 deadline to introduce a fiscal 2014 budget, theScranton,PA (unrated), faces a $20million gap for the fiscal year beginning January 1, 2014. Without a balanced budget, two financial

institutions, Janney Montgomery Scott (unrated) and Amalgamated Bank (unrated), are likely to withdrawfrom planned debt financings necessary for the city to maintain positive operating cash flow in 2014. Theresulting liquidity squeeze would leave the city with few options to meet its financial obligations, raising thethreat of default or bankruptcy.

Oversight by Pennsylvania (Aa2 stable), under its Act 47 distressed municipalities program, has so far beenineffective in relieving the citys financial woes several years after a similar failure in the city of Harrisburg,PA (unrated).

Scranton had intended to complete a $28 million debt issuance by mid-2013 and use the proceeds to pay anarbitration award and fund increases to the citys 2013 pension contribution. However, in July, Janney, theunderwriter, opted to delay the sale, citing Scrantons lack of progress in implementing its Act 47 recovery

plan. Janney has made its participation in the financing contingent on the adoption of a balanced 2014budget.

Amalgamated Bank, currently the sole bidder for the citys cash flow borrowing scheduled for January, hasindicated its purchase of tax and revenue anticipation notes (TRANs) also depends on passage of a balancedbudget. Amalgamated also wants the city to successfully borrow the $28 million via the now-delayed bondsale. Without the banks participation, Scranton will begin fiscal 2014 with effectively a zero cash balance,creating significant operational strain until the bulk of its property tax revenue comes in March.

Scranton faced a similar liquidity crisis in June 2012 after it defaulted on guaranteed revenue bonds for itsparking system. Although the city cured the default swiftly, it was unable to access the capital markets forseveral months and had to temporarily reduce city workers salaries. A second liquidity crisis could have morsevere effects, including additional defaults.

Scranton has $195 million of long-term debt outstanding, including direct obligations of the city, city-guaranteed debts of component units and $15 million of state loans. Of the $195 million, $16 million bearsinterest at a variable rate; the remainder is fixed rate (see Exhibit). Scranton also issues $14.5 million ofTRANs annually.

Outstanding Debt and Fixed Costs for Scranton, Pennsylvania

Scranton's Debt Burden as of 1 November 2012

Direct General Obligation Bonds, Fixed Rate $77,074,58

Guaranteed Parking Authority Revenue Bonds $49,450,00

State Infrastructure Loans $27,446,47

Tax and Revenue Anticipation Notes $14,500,00

Guaranteed Lease Revenue Bonds, Fixed Rate $11,600,00

Guaranteed Lease Revenue Bonds, Variable Rate $5,885,00

Direct General Obligation Bonds, Variable Rate $5,575,00

Parking Authority note, Variable Rate $2,800,00

Lease Revenue Bonds, Fixed Rate $1,100,00

Total 195,431,05

Michael DArcyAnalyst

+1.212.553.3830

[email protected]
https://www.moodys.com/credit-ratings/Scranton-City-of-PA-credit-rating-600030181https://www.moodys.com/credit-ratings/Scranton-City-of-PA-credit-rating-600030181https://www.moodys.com/credit-ratings/Scranton-City-of-PA-credit-rating-600030181mailto:[email protected]:[email protected]://www.moodys.com/credit-ratings/Scranton-City-of-PA-credit-rating-600030181


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Outstanding Debt and Fixed Costs for Scranton, Pennsylvania

Fixed Costs, 2011 Audited Financials

Debt Service $7,512,19

Pension Contributions $8,873,31Retiree Healthcare Benefits $8,994,45

Total Fixed Costs, Fiscal 2011 25,379,96General & Debt Service Fund Expenditures, Fiscal 2011 $64,018,28

Fixed Costs as a Percent of General Fund Expenses, Fiscal 2011 39.64%Note: 2011 audited financials are the most recent published by the city

Source: City of Scranton, Pennsylvania, 2011 financial statements and 2012 Offering Statements

The continued crisis in Scranton underscores Act 47s limitations in assisting financially distressed cities. InHarrisburg, the mayor and city councils inability to agree on a recovery plan and city councils attempt tofile for bankruptcy in late 2011 (which was rejected by a court) resulted in the state appointing a receiver to

manage the citys finances via an amendment to Act 47. The receiver was unable to prevent further defaultson both guaranteed and direct general obligation debt, however, which had begun in late 2009. UnderPennsylvania law, local governments may only file for Chapter 9 bankruptcy protection with state consent.

Act 47, which provides for outside advisors to assist distressed municipalities with their recovery plans, hasbeen implemented 27 times since 1987. But it fails to give the state authority to compel local governments tfollow specific courses of action, a weakness relative to other states distressed municipal oversight programsThat weakness has come into focus in both Harrisburg and Scranton, where acrimonious political climateshave derailed recovery plans.

Scrantons inability to resolve its political disputes and execute a recovery plan has undercut its credibilitywith key lenders. But elected officials have consistently maintained that bankruptcy protection is not anoption, raising the prospect that the state could, as with Harrisburg, become more deeply involved either

through further Act 47 amendments or other actions not addressed in the statute.


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MOODYS WEEKLY CREDIT OUTLOOK: US PUBLIC FINANCE EDITION NOVEMBER 7,

Illinois Improved Pension Liability Does Not Outweigh Failure to Enact Reforms

On October 25 and 29 , preliminary plan valuations for fiveIllinois(A3 negative) retirement systems showe

that the plans had reduced their Moodys-adjusted net pension liability (ANPL) by $16.6 billion, or 9%, for

the year ended June 30. Still, inaction on benefit reforms more than outweighs the modest ANPL decline

and leaves severe pension deficits as the main credit pressure for Illinois, the lowest-rated US state.

The statewide pensions combined ANPLs as of 30 June, and after our adjustments, fell to $173.0 billion

from $189.6 billion a year earlier (see Exhibit 1). This was the result of favorable investment performance

and rising interest rates. Investment returns totaled 12.9% on an asset-weighted basis, exceeding a 7.9%

blended return assumption. The gains accounted for 37% of the net ANPL decline. Rising interest rates

between valuation dates had an even bigger effect. We derive ANPL figures by making adjustments to

reported numbers, such as applying a market-based discount rate (the Citibank Pension Liability Index) to

estimate the present value of liabilities. The index rose to 4.81% as of June 30 from 4.13% a year earlier.

Factoring in a rise in the plans reported liabilities, the 68-basis-point increase was responsible for 63% of th

ANPL reduction.

EXHIBIT 1

Moodys-Adjusted Net Pension Liability for Illinois Five Pension Plans as of June 2013, $ Millions

2012 2013 Change

Teachers' Retirement System (TRS) $108,209 $98,854 ($9,355) -9%

State Employees' Retirement System (SERS) $40,658 $37,375 ($3,283) -8%

State Universities Retirement System (SURS) $38,037 $34,240 ($3,797) -10%

Judges' Retirement System (JRS) $2,302 $2,180 ($122) -5%

General Assembly Retirement System (GARS) $380 $365 ($14) -4%

Total $189,586 $173,014 ($16,571) -9%

Source: Preliminary pension valuation data and our pension adjustments, as explained in Adjustments to US State and Loca l Government Reported

Pension Data.

Pension deficits have factored into all five Illinois downgrades since early 2009 and are still the states

primary credit challenge. The state will remain an outlier despite the 2013 ANPL decline, in part because th

three-year average ANPL used in our methodology actually rose by 7.2% to $165.8 billion. Also, other state

will benefit from the same investment and discount-rate factors. Our most recent ranking, published June

27, showed Illinois with an ANPL/revenues ratio of 241% versus a 50-state median of 45%. Only legislative

reforms reducing liabilities through cuts in benefits, or very substantial increases in contributions to boost

assets, will reduce the states ANPLs closer to median levels.

Illinois annual pension contributions are governed by state law that requires an annual determination of a

level percentage-of-payroll contributions that, according to actuarial forecasts, will leave the plan with assets

equal to 90% of liabilities by 2045. This framework, although lax compared with common standardstargeting full amortization in 30 years, still squeezes the resources available for other budgetary needs (see

Exhibit 2).

ed Hamptonice President - Senior Analyst

[email protected]

homas Aaronnalyst

[email protected]
https://www.moodys.com/credit-ratings/Illinois-State-of-credit-rating-600024371https://www.moodys.com/credit-ratings/Illinois-State-of-credit-rating-600024371https://www.moodys.com/credit-ratings/Illinois-State-of-credit-rating-600024371http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151398http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151398http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151398http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151398http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151398http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151398https://www.moodys.com/credit-ratings/Illinois-State-of-credit-rating-600024371


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EXHIBIT 2

Projected Budgetary Pressure from Pensions and Pension Debt, $ Millions

2013 2014 2015

POB Debt Service (2010-11 Bonds) $974.6 $1,051.6 $1,219.3

POB Debt Service (2003 Bonds) $586.4 $582.5 $587.6

Regular Contributions $5,867.1 $6,833.0 $7,033.2

Total Expense $7,428.1 $8,467.1 $8,840.1

Projected General Fund Revenues (State and Federal) $34,281.0 $35,081.0 $33,432.0

Pensions' Share of General Fund Revenues 22% 24% 26%

Source: Three-Year Budget Forecast, FY 2014 FY 2016, Illinois Commission on Government Forecasting and Accountability, April 2013.

Including debt service on pension obligation bonds, the state legislature projected that the annual pension

burden would rise to 26% of General Fund revenues in fiscal 2015 from 22% two years earlier, based on

funding expected prior to the most recent valuations. The increased portion allocated to pensions and

pension-related debt stems partly from the loss of 2011 income tax increases, which is expected to reduce2015 revenues by $2.2 billion. The latest valuations appear to have little effect on the states statutorily

required contributions, changing the combined 2014 and 2015 payments by only about $50 million.

Illinois Governor Pat Quinn and other leaders have advocated benefit reforms to strengthen the retirement

systems and limit associated budget pressure. Some observers had hoped legislators would enact reforms in a

year-end session that runs through November 7, putting reforms in place for the new fiscal year. But

consensus on how to cut liabilities while skirting legal challenges appears unlikely this week. Illinois has one

of the few US state constitutions that explicitly bar reductions in pension benefits, so the state expects

employees to sue shortly after legislators act, in any case. Without a special session, the legislatures next

chance will come in the January to May session, which could mean litigation will delay the reforms

implementation beyond the start of the next fiscal year.
http://cgfa.ilga.gov/upload/2013_3_yr_bdgt_4castfy2014_fy2016.pdfhttp://cgfa.ilga.gov/upload/2013_3_yr_bdgt_4castfy2014_fy2016.pdfhttp://cgfa.ilga.gov/upload/2013_3_yr_bdgt_4castfy2014_fy2016.pdfhttp://cgfa.ilga.gov/upload/2013_3_yr_bdgt_4castfy2014_fy2016.pdf


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MOODYS WEEKLY CREDIT OUTLOOK: US PUBLIC FINANCE EDITION NOVEMBER 7,

Loss of Federal Education Grants Would Be Credit Negative for CaliforniaSchool Districts

On October 28, the US Department of Education (DOE) warned the California State Board of Education

that state legislation suspending federally mandated standardized testing violates federal law, potentially

costing California school districts at least $3.5 billion in federal funds. The DOE notice is credit negative foCalifornia school districts because of the significant amount of funding at risk for at least the 2014-15 fiscal

year.

California school districts are in the process of moving from traditional standardized tests to new student

examinations under the multistate Common Core standards. In a transition to the new tests, which the

state has scheduled to begin in spring 2015, the new law (AB 484) removes the requirement that school

districts conduct the traditional mathematics and language arts exams. Instead, the law requires districts to

conduct field tests of the new Common Core examinations in either mathematics or language arts, but no

both. The DOE argues the move violates Title I of the Elementary and Secondary Education Act (ESEA) of

1965.

Withholding various federal grants would mainly affect school districts with significant populations of low-income, special education, migrant and English-learner students. Although California school districts are

funded primarily through state aid and local property taxes, federal funding accounts for 10% of total school

district funding. A loss of $3.5 billion in federal grants would have a disproportionate effect on districts

receiving a larger share of federal funds, includingPalmdale Elementary School District(A1),Fresno Unified

School District(Aa3 negative) andSan Bernardino City Unified School District(A2) (see Exhibit).

Largest Recipients of Federal Aid in Rated California School DistrictsEffects of a Loss of Federal Funds Would Vary Among Districts

California School DistrictFederal Revenue*

($000)Total Operating Revenue

($000)

Federal Revenue* asPercent of Operating

Revenue

Los Angeles Unified (Aa2 stable) $553,268 $6,785,392 8%

Fresno Unified (Aa3 negative) $79,139 $669,585 12%

San Diego Unified (Aa3 stable) $69,701 $1,160,203 6%

Long Beach Unified (Aa2) $55,875 $689,539 8%

San Bernardino City Unified (A2) $42,943 $499,315 9%

Santa Ana Unified (Aa3 negative) $32,365 $505,857 6%

Sacramento City Unified (A1 stable) $28,812 $420,763 7%

Stockton Unified (A2) $26,822 $325,011 8%

Palmdale Elementary (A1) $26,405 $162,332 16%

Fontana Unified (Aa3) $24,426 $314,762 8%

Garden Grove Unified (Aa2) $23,261 $378,070 6%

* Federal revenue includes certain grants under Title I and III of ESEA and the Individuals with Disabilities and Education Act. Data as of fiscal year

ended 30 June 2012.

Source: California Department of Education and Moodys

School districts receive a variety of federal aid. Just looking at certain grants under Title I and III of ESEA

and Individuals with Disabilities and Education Act (the largest grants at risk under the notice from DOE),

theLos Angeles Unified School District(Aa2 stable) received $553 million in fiscal 2012, more than any

ric Harpernalyst

[email protected]
https://www.moodys.com/credit-ratings/Palmdale-Elementary-School-District-CA-credit-rating-600039320https://www.moodys.com/credit-ratings/Palmdale-Elementary-School-District-CA-credit-rating-600039320https://www.moodys.com/credit-ratings/Palmdale-Elementary-School-District-CA-credit-rating-600039320https://www.moodys.com/credit-ratings/Fresno-Unified-School-District-CA-credit-rating-600032533https://www.moodys.com/credit-ratings/Fresno-Unified-School-District-CA-credit-rating-600032533https://www.moodys.com/credit-ratings/Fresno-Unified-School-District-CA-credit-rating-600032533https://www.moodys.com/credit-ratings/Fresno-Unified-School-District-CA-credit-rating-600032533https://www.moodys.com/credit-ratings/San-Bernardino-City-Unif-Sch-Distr-CA-credit-rating-800033848https://www.moodys.com/credit-ratings/San-Bernardino-City-Unif-Sch-Distr-CA-credit-rating-800033848https://www.moodys.com/credit-ratings/San-Bernardino-City-Unif-Sch-Distr-CA-credit-rating-800033848https://www.moodys.com/credit-ratings/Los-Angeles-Unified-School-District-CA-credit-rating-600003131https://www.moodys.com/credit-ratings/Los-Angeles-Unified-School-District-CA-credit-rating-600003131https://www.moodys.com/credit-ratings/Los-Angeles-Unified-School-District-CA-credit-rating-600003131https://www.moodys.com/credit-ratings/Los-Angeles-Unified-School-District-CA-credit-rating-600003131https://www.moodys.com/credit-ratings/San-Bernardino-City-Unif-Sch-Distr-CA-credit-rating-800033848https://www.moodys.com/credit-ratings/Fresno-Unified-School-District-CA-credit-rating-600032533https://www.moodys.com/credit-ratings/Fresno-Unified-School-District-CA-credit-rating-600032533https://www.moodys.com/credit-ratings/Palmdale-Elementary-School-District-CA-credit-rating-600039320


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other district in the state by far. The second-largest recipient was the states fourth-largest school district,

Fresno Unified, which received $79 million.

In fiscal 2012, total K-12 school district funding was approximately $60 billion, so the loss of $3.5 billion

would equal nearly 6% of statewide district funding. Some of the potential loss in federal funds would beoffset by Californias recently adopted Local Control Funding Formula, which funnels additional aid to

districts with populations of low-income and English-learner students.

California was not blindsided by the DOEs threat. Immediately before the passage of AB 484, the DOE

warned the state about the potential cuts if the legislation passed. Legislators moved ahead anyway and

Governor Jerry Brown signed the bill.

We expect any loss of federal funds to be temporary.Because school districts are forward-funded by the

federal government, the first loss of federal funds is unlikely to affect California school districts overall until

fiscal 2015. Given that districts are set to implement Common Core testing in spring 2015 and come into

compliance with federal requirements, we believe an ongoing loss of federal funding after fiscal 2015 is

unlikely. Also, state education officials and school districts still have time to negotiate a resolution with theDOE that will avoid the multi-billion-dollar cuts.


9/18


Virginia Supreme Court Ruling Is Credit Positive for the State

On October 31, the Virginia Supreme Court ruled that tolls the state plans to use to construct a new tunnel

under the Elizabeth River in the Hampton Roads region ofVirginia(Aaa stable) are a user fee, not a tax, an

thus do not violate the states constitution. The ruling is credit positive for the state, which has focused on

public-private partnerships as a way to help finance its $13 billion transportation infrastructure plan.

The Supreme Court ruled that the tolls drivers will start to pay in February 2014 for the $2 billion Elizabeth

River Crossing are in exchange for a particularized benefit and are not compelled by the government,

meaning that the tolls are fees for use. A lower court ruled the tolls were taxes because they were designed to

raise revenue. Taxes can only be levied by the state when approved by the legislature, which was the basis of

opposition by residents who sued the project in July 2012.

Virginia has relied on similar public-private funding structures to finance transportation infrastructure more

than other states. Upholding of the lower courts ruling that the tolls are a tax would have impinged on the

states ability to use such structures in the future. The state would then either have to cancel projects it

viewed as necessary or find other resources to pay for them.

Although Virginia this year enacted a major transportation finance reform that could raise as much as $3.5

billion of new revenue over the next five years, those funds are already programmed into its transportation

capital and maintenance budgets.1For several years, especially during the downturn when gas taxes dropped

Virginia had to delay transportation capacity expansion and congestion mitigation projects to dedicate scarc

resources to required maintenance.

Virginia completed five projects using the public-private structure; another seven are currently under

construction. Outgoing Governor Bob McDonnell plans to introduce more funding structures in his final

budget proposal next month, including availability payments that would allow construction for projects

that currently do not have available funding. Tapping private financing allows the state to complete necessar

infrastructure projects without issuing bonds itself. Of Virginias four largest transportation public-private

partnership projects, state dollars accounted for one third of the financing, with the remainder comingthrough private contributions and federal funds (see Exhibit 1).

EXHIBIT 1

State Investment Accounts for One Third of Funding for Four Major Transportation Projectsin Virginia

Project Cost$ Millions

State Investment$ Millions

Percent ofTotal Cost

495 Express Lanes $1,900 $409 22%

95 Express Lanes 925 71 7.60%

US Route 460 Corridor 1,393 1,150 83%

Elizabeth River Crossing 2,100 420.5 20%Total $6,318 $2,050.50 33.15%

Source: Virginia Office of Transportation Public-Private Partnerships

For the Elizabeth River project, tolls account for just 12% of the projected cost (see Exhibit 2).

1 SeeVirginias Robust New Transportation Funding Package Is Credit Positive, February 28, 2013.

ick Samuelsice President - Senior Credit Officer

[email protected]
https://www.moodys.com/credit-ratings/Virginia-Commonwealth-of-credit-rating-600026613https://www.moodys.com/credit-ratings/Virginia-Commonwealth-of-credit-rating-600026613https://www.moodys.com/credit-ratings/Virginia-Commonwealth-of-credit-rating-600026613http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151191http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151191http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151191http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM151191https://www.moodys.com/credit-ratings/Virginia-Commonwealth-of-credit-rating-600026613


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EXHIBIT 2

Private Investment Comprises Nearly 50% of Elizabeth River Cross Project Funding

Source: Elizabeth River Crossing Project

Project Revenue DuringConstruction (Tolls)12%

VDOT Contributions toReduce Tolls20%

Federal HighwayAdministration Loans22%

Private Activity Bonds33%

Equity Commitments fromSkanska & Macquarie13%


11/18


Monetization of University Property Can Benefit Both Town and Gown

On October 29, the Board of Trustees for the Endowment Fund forNorth Carolina State University(Aa1stable) announced the sale of 79,000 acres of Hofmann Forest for $150 million. The agreement is expectedto bolster the endowment of the universitys College of Natural Resources (CNR). It is also expected to

increase property tax revenue in two counties slightly. The deal speaks to the trend of US universitiesexploring the monetization of land and real estate assets that can benefit both the schools and localgovernments. It also marks a very modest credit positive for both NC State and the local governments.

For a university, the sale of non-essential real estate can increase endowments and financial reserves; generateadditional income to advance its mission; and reduce operating costs for the asset. For a local government,the addition of previously tax-exempt property to the tax rolls can bolster its budget. Over the longer term,the local governments also benefit economically from increasing property, sales and fee revenues as theproperties become developed or redeveloped.

Historically, universities have been loath to part with real estate, but many are now reexamining theimportance of retaining non-core assets following multiple years of constrained revenue growth. With thatapproach and an improving real estate market in certain areas, we expect more transactions in 2014. Weanticipate this more for urban universities than for rural universities given the stronger buyers market andopportunities for alternative uses.

More than 30% of the Moodys-rated public university portfolio experienced a decline in operating revenuein 2012, a significant increase over the prior year (see Exhibit). A smaller, but still significant 16% of privateuniversities also had declining operating revenues in 2012, with another 17% having revenue growth ofunder 2%.

Universities reassessing monetization of assets shows prudent fiscal management, if proceeds are used to

support longer-term strategic objectives. Selling real estate to compensate for financial imbalance, however,

is a non-recurring event that does not address underlying problems.

Revenue Is Pressured at Both Public and Privates

Source: Moodys MFRA

0%

10%

20%

30%

40%

50%

60%

Public Universities Private Universities Public Universities Private Universities Public Universities Private Universities

2010 2011 2012

Decline in operating Revenue 0%-2% change in operating revenue

Fiscal Year

%ofSector-specificRatedPortfolio

Susan Fitzgeraldenior Vice President

[email protected]

Ted DamutzVice President - Senior Credit Officer

[email protected]
https://www.moodys.com/credit-ratings/North-Carolina-State-Univ-at-Raleigh-NC-credit-rating-600025768https://www.moodys.com/credit-ratings/North-Carolina-State-Univ-at-Raleigh-NC-credit-rating-600025768https://www.moodys.com/credit-ratings/North-Carolina-State-Univ-at-Raleigh-NC-credit-rating-600025768mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.moodys.com/credit-ratings/North-Carolina-State-Univ-at-Raleigh-NC-credit-rating-600025768


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In the case of the Hofmann Forest, the sale agreement contains provisions that would enable NC State tocontinue to use a portion of the property for academic needs. The $150 million purchase price will be addedto an endowment supporting the CNR. Hofmann Forest has historically been carried in the endowment at$117 million, so the balance sheet impact is limited. However, the sale is expected to result in increased

revenue generation. Under the universitys 4% spending policy, the $150 million endowment is expected toprovide $6 million of support annually, compared to less than $1 million of net income derived from theland in 2012. This is material to CNR, but not the university overall, which has a $1.2 billion operatingbudget. The transaction has not yet closed, and a group is seeking injunctive relief to stop the sale.

Onslow(Aa2) and Jones counties (unrated), which include portions of the forest, are expected to realizeslight increases in assessed valuation after the sale with new residential and commercial developments.Onslow County officials estimate an additional $116,000 in annual property tax revenues to a $160 millionbudget.

In another recent sale,St. Johns University(A3 positive) sold a building in Manhattan for $219 million,prompting us to revise the universitys outlook to positive from stable in August. The university doubled itsunrestricted financial resources and increased its operating flexibility. With an assumed 5% spending rate,

should the university hold the funds from the sale in an endowment, the operating impact would add $10million, a positive but not substantial increase, to the universitys $470 million-plus of operating revenues.

In response to declining enrollment,Brooklyn Law School(Baa1 stable) has placed six of its no-longer-needed residential buildings on the market. The school has other marketable real estate in Brooklyn, whichcould be sold over time without materially impacting core operations.
https://www.moodys.com/credit-ratings/Onslow-County-of-NC-credit-rating-600025859https://www.moodys.com/credit-ratings/Onslow-County-of-NC-credit-rating-600025859https://www.moodys.com/credit-ratings/St-Johns-University-NY-credit-rating-800037183https://www.moodys.com/credit-ratings/St-Johns-University-NY-credit-rating-800037183https://www.moodys.com/credit-ratings/St-Johns-University-NY-credit-rating-800037183https://www.moodys.com/credit-ratings/Brooklyn-Law-School-NY-credit-rating-800004245https://www.moodys.com/credit-ratings/Brooklyn-Law-School-NY-credit-rating-800004245https://www.moodys.com/credit-ratings/Brooklyn-Law-School-NY-credit-rating-800004245https://www.moodys.com/credit-ratings/Brooklyn-Law-School-NY-credit-rating-800004245https://www.moodys.com/credit-ratings/St-Johns-University-NY-credit-rating-800037183https://www.moodys.com/credit-ratings/Onslow-County-of-NC-credit-rating-600025859


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CREDIT IN DEPTH

New Jersey Municipalities Benefit from Post-Sandy State and Federal Aid

Just over a year ago, Superstorm Sandy wreaked unprecedented damage alongNew Jerseys (Aa3 stable)coastline. Today, we expect the credit quality of the states affected local governments to remain intact

because they receive state and federal aid, and the state provides effective help in applying for federal

assistance. Additionally, most local government issuers in the state have low debt burdens and access to bond

markets.2

Government aid is flowing. Both federal and state money continue to alleviate liquidity constraints and

capital needs that the storm created. Last June, the Federal Emergency Management Agency (FEMA)

approved an additional $81.5 million for New Jersey local governments to augment the $408 million

originally promised (see Exhibit 1). The added money raises FEMAs contribution to cover damage-repair

costs to 90%, up from the original 75%. The June-approved funds add to $125 million already distributed

by federal Community Disaster Recovery Loans to affected municipalities to help offset property tax revenu

declines. The added funds will boost the economies of a multitude of communities inOcean County(Aaanegative) and other hard-hit areas (see Exhibit 1).

EXHIBIT 1

Largest Savings for New Jersey Municipalities as a Result of 90% FEMA Match

Municipality 75% FEMA Match 90% FEMA Match Savings

Toms River (Aa3 stable) $87,363,820 $104,836,584 $17,472,764

Atlantic Highlands $15,640,890 $18,769,068 $3,128,178

Middletown (Aa2) $11,346,286 $13,615,543 $2,269,257

Sayreville (Aa3) $10,383,977 $12,460,773 $2,076,796

Seaside Heights (A3) $8,133,735 $9,760,482 $1,626,747

Brick (Aa2) $7,976,802 $9,572,162 $1,595,360

Union Beach (A2) $7,143,497 $8,572,196 $1,428,699

Freehold (Aa2) $6,909,296 $8,291,155 $1,381,859

Monmouth Beach $6,866,597 $8,239,916 $1,373,319

Jersey City (A2 positive) $6,884,001 $8,250,401 $1,366,400

Total for All NJ Local Governments $407,980,852 $489,481,748 $81,500,896

Source: New Jersey Office of Recovery and Rebuilding

FEMA is delivering on its initial promises and has distributed substantial portions of the reimbursements to

affected communities.Seaside Heights(A3) has already collected $5.7 million of the approximately $9.7

million promised by the federal government, andPoint Pleasant Beach(A1) has received $2.7 million of$6.1 million promised. FEMA will disburse the remaining funds over the next few years, although in areas

where dollars are flowing more slowly, local governments may need to roll larger portions of their notes than

originally planned.

2 SeeHurricane Sandy Unlikely to Threaten Public Finance Issuers Credit,November 13, 2012 andUS Public Finance Issuers Transition to Recovery state in the Aftermaof Hurricane Sandy,December 19, 2012.

osellyn Yousef

Assistant Vice President - [email protected]

Dan SeymourAnalyst

[email protected]
https://www.moodys.com/credit-ratings/New-Jersey-State-of-credit-rating-600025188https://www.moodys.com/credit-ratings/New-Jersey-State-of-credit-rating-600025188https://www.moodys.com/credit-ratings/New-Jersey-State-of-credit-rating-600025188https://www.moodys.com/credit-ratings/Ocean-County-of-NJ-credit-rating-600025381https://www.moodys.com/credit-ratings/Ocean-County-of-NJ-credit-rating-600025381https://www.moodys.com/credit-ratings/Ocean-County-of-NJ-credit-rating-600025381https://www.moodys.com/credit-ratings/Seaside-Heights-Borough-of-NJ-credit-rating-600027434https://www.moodys.com/credit-ratings/Seaside-Heights-Borough-of-NJ-credit-rating-600027434https://www.moodys.com/credit-ratings/Seaside-Heights-Borough-of-NJ-credit-rating-600027434https://www.moodys.com/credit-ratings/Point-Pleasant-Beach-Borough-of-NJ-credit-rating-800031040https://www.moodys.com/credit-ratings/Point-Pleasant-Beach-Borough-of-NJ-credit-rating-800031040https://www.moodys.com/credit-ratings/Point-Pleasant-Beach-Borough-of-NJ-credit-rating-800031040http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM147237http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM147237http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM148381http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM148381http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM148381http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM148381mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM148381http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM148381http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM147237https://www.moodys.com/credit-ratings/Point-Pleasant-Beach-Borough-of-NJ-credit-rating-800031040https://www.moodys.com/credit-ratings/Seaside-Heights-Borough-of-NJ-credit-rating-600027434https://www.moodys.com/credit-ratings/Ocean-County-of-NJ-credit-rating-600025381https://www.moodys.com/credit-ratings/New-Jersey-State-of-credit-rating-600025188


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The state has aided local communities with additional operating funds, including the $1.8 billion received in

Community Disaster Block Grant Disaster Recovery (CDBG-DR) funds, which the Department of Housin

and Urban Development (HUD) allocated to New Jersey as part of its initial fund allocation. These CDBG

DR funds must be used to satisfy unmet needs -- financial needs not satisfied by other public or private

funding sources such as FEMA funds, Small Business Administration disaster loans or private insurance.HUD also requires that CDBG-DR programs focus predominantly on the states most affected counties and

on the states low- and moderate-income populations.

Capital markets remain accessible. Following the storm, many issuers passed special emergency resolutions

to spend unbudgeted money on rebuilding and repairs, funded through temporary notes. In a few cases,

issuers paid interest rates on these notes above market levels,3but not to a degree that would impair financia

operations. A receptive capital market for bonds and notes helps New Jersey communities manage liquidity

disruptions or fund capital needs arising from the storm. Sandy-affected New Jersey issuers typically expect

to repay the temporary notes with their FEMA reimbursements.

Most local governments in New Jersey have small debt burdens. Modest debt burdens (see Exhibit 2) are

fundamental credit strengths of the states local governments. Small debt burdens have allowed manygovernments to issue bonds or notes to fund post-storm expenditures without debt reaching unduly high

levels.

EXHIBIT 2

Median Net Direct Debt as a Percent of Full Real Estate Valuation for New Jersey Cities and US Cities

Source: Moodys

The state is playing a crucial oversight role. We expect the New Jersey Division of Local Government

Services to remain active in helping recovery efforts and advising issuers on how to apply for federal loans

and aid. In some instances, the division has completed federal Community Development Block Program

Essential Service Grant applications for communities. The division also actively helps issuers develop plans

for refinancing notes issued in 2012, including facilitating discussions with banks, to ensure timely and

proper execution of financings.

Challenges remain, despite these positive efforts. Communities must still identify funding sources to rebuild

storm-eroded sand dunes, which, if not rebuilt, could leave them exposed to another storm and lower

property values.

3 For example, following Sandy, theBorough of Lavallette(General Obligation Aa3 negative) issued short-term notes with an interest rate of 1.4%, which was well highthan prevailing short-term rates.

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

Aaa Aa1 Aa2 Aa3 A1 A2

New Jersey Cities Median Debt Burden US Cities Median Debt Burden
https://www.moodys.com/credit-ratings/Lavallette-Borough-of-NJ-credit-rating-600028359https://www.moodys.com/credit-ratings/Lavallette-Borough-of-NJ-credit-rating-600028359https://www.moodys.com/credit-ratings/Lavallette-Borough-of-NJ-credit-rating-600028359https://www.moodys.com/credit-ratings/Lavallette-Borough-of-NJ-credit-rating-600028359


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Some communities still have significant damage. Many residents could not start rebuilding their homes unti

FEMA guidelines were released during the summer. It is unclear how quickly property values and seasonal

revenues such as beach fees will rebound, but we will learn more as governments adopt their 2014 budgets in

the first quarter of next year.


16/18


RESEARCH HIGHLIGHTS

State HFA Delinquencies Continue to GrowState Housing Finance Agencies (HFAs) continue to demonstrate solid financial performance. However,total delinquencies and foreclosures in their single-family whole loan programs reached an all-time, mid-yeahigh of 7.29%. The sustained high level of delinquencies challenges management and growth of theprograms since the higher percentage of delinquent loans translates into reduced loan revenue. However, wedo not expect to take any rating actions because of mitigating factors such as the HFAs strong balancesheets, rising home prices and the continued solid performance of mortgage insurers helped by the federalgovernment.

US Not-For-Profit Healthcare Quarterly Ratings: Patient Volume Declines Continue to Steer Higher Paceof Downgrades

In the third quarter of 2013, there were 10 rating downgrades and eight upgrades for not-for-profit hospitalresulting in a ratio of 1.3 to 1. This is an increase from six downgrades and three upgrades in the priorquarter. The par amount of debt downgrades impacted was $2.7 billion, compared to $2.4 billion ofupgraded debt. Reduced patient volumes continued to be a key driver of rating downgrades. In line withsecond-quarter results, six of the 10 downgrades were due primarily to material declines in admissions.

US Airport Medians for FY 2012

Enplanement medians for US airports point to growth at the major hub airports, but overall growth wasweak, with the median growth in enplanements at 0.2%. The large hub airports experienced strong growthin connecting traffic, but enplanement levels at the medium and smaller hubs continued multi-year declines

We view the large hubs as benefiting from industry re-consolidation around the traditional hub-and-spokemodel, largely at the expense of medium-sized hubs and limiting point-to-point travel between smallermarkets. Tepid economic growth was not able to compensate for airline industry consolidation and thereduction of point-to-point service at medium hub airports.
http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159903http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159903http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159451http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159451http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159451http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159921http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159921http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159921http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159451http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159451http://www.moodys.com/viewresearchdoc.aspx?docid=PBM_PBM159903


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RATING CHANGE HIGHLIGHTS

Torrance Memorial Medical Center (CA) Downgraded to A3; Outlook Stable

Nov. 4 We downgraded Torrance Memorial Medical Center's rating to A3, affecting $285 million,because of weak operating performance through the first eight months of fiscal year 2013 and several years odeclining margins. The weaker margins result from falling patient volumes and investments in physicianpractices. The lower performance comes as Torrance is entering the final year of construction on a newpatient tower and is in the midst of a large equity contribution to that project. The outlook is stable.

Sarasota County's (FL) GOLT Upgraded to Baa1; Outlook Positive

Oct. 31 We upgraded the rating on Sarasota County's (FL) Limited Ad Valorem Tax Bonds, Series 2008and 2005, to Baa1 from Baa2, and revised the outlook to positive from stable, affecting $76.1 million. Theupgrade reflects the county's recovering taxable values following several years of protracted losses, which,

together with defeased debt, has improved coverage levels. These bonds were originally issued to finance theacquisition and protection of environmentally sensitive lands and parkland.

Springfield, MO Board of Public Utility Upgraded to Aa2; Outlook Stable

Oct. 31 We upgraded Springfield, MO's MO Board of Public Utility's senior lien revenue bond rating toAa2 from Aa3 and subordinate lien 2006 lease obligation rating to Aa3 from A1, affecting approximately$715 million. The rating outlook is stable. The upgrade reflects the utility's prudent fiscal management anddemonstrated willingness to proactively advance approval of multi-year base rate increases to adequately funcapital investments while it also maintains strong and stable financial metrics and competitive retail rates.The upgrade also reflects the utility's successful commissioning of its 300 MW dual fuel capable coal/gasfired unit since January 2011.

University of Tulsa's Outlook Revised to Stable

Oct. 30 We changed the outlook on the University of Tulsas A3 rating, affecting $159 million, to reflecthow we expect the universitys management team to engage in the universitys core strengths andtransformative campus community to improve cash flow and balance sheet metrics. The A3 rating and stabloutlook incorporate the very large total financial resources supporting TU, steady student demand andstrong gift support, offset by thin operating margins and liquidity.

Franciscan Alliance's Outlook Revised to Negative; Aa3 Affirmed

Oct. 30 We changed the outlook on Franciscan Alliances (f.k.a Sisters of St. Francis Health Services, Inc)$1.1 billion in bonds to negative from stable because of our concern that persistently thin operating cashflow may lead to a decline in unrestricted cash balances, exacerbating already modest debt measures. While

the system is implementing cost reductions to improve performance, we believe progress may be slower thanprojected given competitive and general industry-wide challenges. A rating downgrade will be considered inthe absence of operating improvement as projected for fiscal year 2014.
https://www.moodys.com/research/Moodys-downgrades-Torrance-Memorial-Medical-Center-CA-to-A3-outlook--PR_286081https://www.moodys.com/research/Moodys-downgrades-Torrance-Memorial-Medical-Center-CA-to-A3-outlook--PR_286081https://www.moodys.com/research/Moodys-downgrades-Torrance-Memorial-Medical-Center-CA-to-A3-outlook--PR_286081https://www.moodys.com/research/Moodys-upgrades-Sarasota-Countys-FL-GOLT-to-Baa1-from-Baa2--PR_285686https://www.moodys.com/research/Moodys-upgrades-Sarasota-Countys-FL-GOLT-to-Baa1-from-Baa2--PR_285686https://www.moodys.com/research/Moodys-upgrades-Sarasota-Countys-FL-GOLT-to-Baa1-from-Baa2--PR_285686https://www.moodys.com/research/Moodys-upgrades-Springfield-MO-Board-of-Public-Utility-to-Aa2--PR_285669https://www.moodys.com/research/Moodys-upgrades-Springfield-MO-Board-of-Public-Utility-to-Aa2--PR_285669https://www.moodys.com/research/Moodys-upgrades-Springfield-MO-Board-of-Public-Utility-to-Aa2--PR_285669https://www.moodys.com/research/Moodys-changes-outlook-on-University-of-Tulsas-OK-ratings-to--PR_285639https://www.moodys.com/research/Moodys-changes-outlook-on-University-of-Tulsas-OK-ratings-to--PR_285639https://www.moodys.com/research/Moodys-changes-outlook-on-University-of-Tulsas-OK-ratings-to--PR_285639https://www.moodys.com/research/Moodys-revises-Franciscan-Alliances-fka-Sisters-of-St-Francis-Health-Rating-Update--RU_901503888https://www.moodys.com/research/Moodys-revises-Franciscan-Alliances-fka-Sisters-of-St-Francis-Health-Rating-Update--RU_901503888https://www.moodys.com/research/Moodys-revises-Franciscan-Alliances-fka-Sisters-of-St-Francis-Health-Rating-Update--RU_901503888https://www.moodys.com/research/Moodys-revises-Franciscan-Alliances-fka-Sisters-of-St-Francis-Health-Rating-Update--RU_901503888https://www.moodys.com/research/Moodys-revises-Franciscan-Alliances-fka-Sisters-of-St-Francis-Health-Rating-Update--RU_901503888https://www.moodys.com/research/Moodys-changes-outlook-on-University-of-Tulsas-OK-ratings-to--PR_285639https://www.moodys.com/research/Moodys-changes-outlook-on-University-of-Tulsas-OK-ratings-to--PR_285639https://www.moodys.com/research/Moodys-upgrades-Springfield-MO-Board-of-Public-Utility-to-Aa2--PR_285669https://www.moodys.com/research/Moodys-upgrades-Springfield-MO-Board-of-Public-Utility-to-Aa2--PR_285669https://www.moodys.com/research/Moodys-upgrades-Sarasota-Countys-FL-GOLT-to-Baa1-from-Baa2--PR_285686https://www.moodys.com/research/Moodys-upgrades-Sarasota-Countys-FL-GOLT-to-Baa1-from-Baa2--PR_285686https://www.moodys.com/research/Moodys-downgrades-Torrance-Memorial-Medical-Center-CA-to-A3-outlook--PR_286081https://www.moodys.com/research/Moodys-downgrades-Torrance-Memorial-Medical-Center-CA-to-A3-outlook--PR_286081


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MOODYS.CO

CREDIT RATINGS & ANALYSIS

Michel MadelainPresident and Chief Operating Officer

Michael RowanManaging Director, Global Public, Project &Infrastructure Finance

Gail SussmanManaging Director, US Public Finance

John Nelson

Director of Research, Global Public, Project,Infrastructure Finance

Christopher HolmesDirector of Research, US Public Finance

Local Government Ratings

Jack DorerManaging Director, US Public Finance

Naomi RichmanManaging Director, US Public Finance

State Government Ratings

Robert KurtterManaging Director, US Public Finance

Tim BlakeManaging Director, US Public Finance

Healthcare, Higher Education, Not-for-Profits

Kendra SmithManaging Director, US Public Finance

Housing

Kendra SmithManaging Director, US Public Finance

Public Infrastructure

Chee Mee HuManaging Director, Project Finance

EDITORIAL CONTENT

Crystal CarrafielloSenior Vice President, Rating Communications

Robert CoxSenior Editor, Rating Communications

MARKETING & PRODUCT STRATEGY

John WalterDirector, Senior Product Strategist

Sara Harris

Assistant Director, Product Strategist

PRODUCTION

Jason LeeVice President, Production

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CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. (MIS) AND ITS AFFILIATES ARE MOODYS CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OFENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODYS (MOODYSPUBLICATIONS) MAY INCLUDE MOODYS CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKESECURITIES. MOODYS DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANYESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKETVALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODYS OPINIONS INCLUDED IN MOODYS PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICALFACT. CREDIT RATINGS AND MOODYS PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODYSPUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODYSPUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODYS ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODYSPUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDERCONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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All information contained herein is obtained by MOODYS from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as otherfactors, however, all information contained herein is provided AS IS without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a creditrating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODYS is not an auditor andcannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODYS have any liability to any person or entity for (a) anyloss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODYS orany of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any suchinformation, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODYS is advised inadvance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, ifany, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or holdany securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling.

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MIS, a wholly-owned credit rating agency subsidiary of Moodys Corporation (MCO), hereby discloses that most issuers of debt securities (including corporate and municipal bonds,debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees

ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MISs ratings and rating processes. Informationregarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC anownership interest in MCO of more than 5%, is posted annually atwww.moodys.com under the heading Shareholder Relations Corporate Governance Director and ShareholderAffiliation Policy.

For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODYS affiliate, Moodys Investors Service Pty Limited ABN 61003 399 657AFSL 336969 and/or Moodys Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to wholesale clientswithin the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODYS that you are, or are accessing thedocument as a representative of, a wholesale client and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to retail clientswithin the meaning of section 761G of the Corporations Act 2001. MOODYS credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securitiesof the issuer or any form of security that is available to retail clients. It would be dangerous for retail clients to make any investment decision based on MOODYS credit rating. If in doubt youshould contact your financial or other professional adviser.
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weekly credit outlook for public finance - november 8, 2013.pdf

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