Pasco County School, Fla., COPs Downgraded to A1 by Moody's

Moody's Investors Service said it has downgraded to A1 from Aa3 the rating on the Pasco County School Board, Fla.'s outstanding certificates of participation, and has also downgraded the school district's issuer rating to Aa3 from Aa2.

Moody's assigned an A1 rating to board's sale of $42.5 million COPs Series 2013A.

The A1 COP rating affects $330.9 million in rated, post-sale certificates under the master lease, including the current offering. Moody's has also affirmed the A2 rating on the district's $2.96 million of capital improvement revenue bonds, Series 2003.

The COPs are payable from annually-appropriated lease payments made by the board (lessee) to the leasing corporation (lessor), and effectively paid from a separate capital outlay millage available for this purpose.

The capital improvement revenue bonds, Series 2003 are secured by a fixed amount ($223,250) of sales tax revenues received from the state and distributed to the district pursuant to a special act. The sales tax was substituted statewide (beginning July 1, 2000) for race track and jai alai funds originally securing this type of security.

Proceeds of the Series 2013A certificates will refund $45.7 million of the Series 2004 certificates to achieve an estimated $2.12 million (4.64% of refunded par) net present value savings taken over the life of the original issue.

The Aa3 COP rating is based on favorable legal protections provided through use of a master lease that enhances the incentive to appropriate, and the availability of a separate financing source, albeit highly leveraged, for payment of debt service.

The certificate rating is related to the downgrade of the district's issuer rating. The A1 COPs rating and Aa3 issuer rating also reflect the narrowing financial position and use of non-recurring revenues, an above average variable rate exposure, and continually-contracting, but still-sizable, tax base.

The A2 rating on the school district's capital improvement revenue bonds, Series 2003 (maturing in 2033) is based on weak legal covenants, and the pledge of a relatively small and reliable component of the state's overall substantial sales tax revenues, which the district has highly leveraged.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER