Moody's Investors Service said it has upgraded to Aa3 from A1 the enhanced rating assigned to Warren County School District's $18 million Qualified Zone Academy Bonds — Direct Subsidy, Series of 2012 (federally taxable).

The outlook for the rating is stable.

The bonds are secured by the district's general obligation, limited tax pledge as subject to Special Session Act 1 property tax limitations (Taxpayer Relief Act) that restrict Pennsylvania school districts' ability to increase the property tax millage beyond an annual index without seeking specific exemptions or voter approval.

The upgrade of the enhanced rating to Aa3 from A1 reflects the addition of security features that allow the bonds to benefit from the Pennsylvania School District Fiscal Agent Agreement Intercept Program, a pre-default intercept program. The bonds were previously rated under the Act 150 intercept program, which is a post-default intercept program.

The program provides for the intercept of state aid for the current fiscal year in the event of a potential failure by the district to pay timely debt service and reflects the intercept program's inherent programmatic strength, which is reflective of the credit profile of the commonwealth, which carries a general obligation rating of Aa2 with a stable outlook.

Pursuant the School Code (Section 6-633), the state is authorized to intercept aid appropriated in the current fiscal year. In the case of the district, the program is further enhanced by a fiscal agent agreement that requires the fiscal agent for the bonds to notify the Secretary of Education of the Commonwealth if the school district fails to make a sinking fund payment 15 days prior to any debt service payment date.

Pursuant to a memorandum of agreement among the Secretary of Education, the Labor, Education and Community Services Comptroller , and the State Treasurer, the timing of the state aid intercept would allow for the timely transfer of appropriated funds to the fiscal agent in amounts sufficient to pay the required debt service on each debt service payment date.

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