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Moody’s assigns ratings to Crosby ISD bonds

NEW YORK – Moody’s Investors Service on June 24 assigned an A1 rating to Crosby Independent School District’s $67,500,000 Unlimited Tax School Bonds, Series 2013. In addition to the underlying rating, they have assigned an Aaa enhanced rating to the Series 2013 bonds provided by a guarantee of the Texas Permanent School Fund (PSF). Proceeds from the Series 2013 sale will be used to fund the construction of a new high school.

Dr. Keith Moore sees the ratings as, “There may be higher rated schools in the state than Crosby, but not very many,”

Calling the bond a general obligation the sale has been moved to July 17 of Unlimited Tax School Building Bonds.

The bonds are secured by an unlimited ad valorem tax on all taxable property within the district. Assignment of the A1 rating reflects the district’s elevated debt burden, moderately sized tax base, above average socio-economic profile, and improving financial reserves.

According to Dr. Moore, “When we set the factors for the bond a lot of things come into play to determine the amount of money that be will raised. One factor is where our tax base is another is how many people are in the district. When we say we can raise $68 Million dollars that is true but it is based on assumptions such as what our tax base is going to be. We have based this bond on conservative assessments.”

The Aaa enhanced rating reflects Moody’s assessment of the Texas Permanent School Fund’s (PSF) ability to make payments on the guarantee relative to the substantial value of the fund corpus. Additional credit considerations include: the PSF’s constitutionally protected corpus, the credit quality of the Texas school district G.O. debt guaranteed by the fund, an investment portfolio that provides satisfactory coverage and liquidity given our estimated probability of calls on the guarantee, and strong legal mechanics that facilitate timely reimbursement to the PSF should guarantee payments occur. For additional information on the PSF program, please see Moody’s Ratings Update Report on the Texas Permanent School Fund dated September 24, 2012.

The districts strengths were listed as trend of operating surpluses and satisfactory financial reserves and more interestingly, anticipated tax base expansion based on preliminary values.

Challenges include elevated debt burden with slow payout.The rating could be improved if there is significant tax base increases coupled with reduction in debt burden. Another challenge would beif everyone moved out of Crosby or if there is some reason a deterioration of General Fund reserves, (no mo’ money.)

The Texas PSF rating was assigned based on Moody’s assessment of the PSF’s ability to make payments on the guarantee relative to the substantial value of the fund corpus. Additional credit factors relevant to the rating include: 1) constitutional protections for the corpus 2) strong state involvement in school districts and state aid intercept/school district takeover authority 3) coverage for potential calls on guarantee 4) size, concentration and correlation of guaranteed debt 5) issuer’s management and governance 6) investment portfolio and liquidity. These attributes were compared against other issuers both within and outside of Texas PSF’s core peer group and Texas PSF’s ratings are believed to be comparable to ratings assigned to other issuers of similar credit risk.