Fitch Ratings assigns an 'AA+' rating to $283.4 million Virginia Public School Authority (VPSA) school financing bonds (1997 resolution), refunding series 2009C, expected to sell via negotiation during the week of Sept. 28, 2009. Additionally, Fitch affirms the 'AA+' ratings on VPSA's $2.9 billion outstanding 1997 resolution bonds and VPSA's $172 million in outstanding educational technology notes. The Rating Outlook is Stable.
The refunding bonds will be issued pursuant to the 1997 resolution, which includes a 'sum sufficient' appropriation from available moneys of Virginia's literary fund and, if those are not adequate, the general fund. The appropriation, which the governor must request from the general assembly pursuant to statute, provides credit enhancement to the local government loan repayments that are the primary source of security. Additional strength derives from state law providing for the withholding of state payments to local governments in the event of a local loan payment default, along with Virginia's fundamental credit strengths and the state commitment to education.
Bond proceeds will be used to refund certain outstanding VPSA 1997 resolution bonds. Local payments of principal and interest are used to pay school facilities bond debt service. No local government has defaulted in VPSA's history, but in the event of a default, state law requires the interception of state payments due to the local unit until the default is cured. Local payments are due approximately 15 days in advance of bond payments, allowing time for implementation of the interception. Finally, if required, the sum sufficient appropriation would be expected to be used.
The literary fund is a constitutional perpetual fund for school purposes that receives escheats, fines, forfeitures, unclaimed property, and unclaimed lottery prizes. The fund received $194.3 million from these sources in fiscal year (FY) 2009, up from $180.9 million in FY2008 and $169.3 million in FY2007. Literary fund appropriations support educational related purposes and supplement general fund appropriations for the teacher retirement fund. For FY2009, $228.7 million was appropriated, up significantly from $124.9 million for FY2008, alleviating general fund pressures. The appropriation from the literary fund in fiscal 2010 was budgeted at $123 million, a level similar to prior years, though the governor has proposed additional literary fund support of $55 million to offset general fund revenue underperformance. The literary fund's cash and investment balance was $52.5 million on June 30, 2009, down from $151.1 million one year prior, reflecting the aforementioned increased general fund support, and the total available fund balance at June 30, 2009 was $342.1 million.
For more information on the commonwealth of Virginia, please see Fitch press release dated Sept. 24, 2009.
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or
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Email: cindy.stoller@fitchratings.com
