and assets that provides the dominant support for
most state revolving fund ratings. In such a case
Standard & Poor’s analysis would expand to
include not only the asset quality and liquidity of
related funds, but also overall program income and
balance sheet performance, including non-leveraged
program areas. Management practices, state-specific
regulations, and statewide economic conditions
could also play a larger role in these instances.Other Municipal Public Purpose Pools
A variety of pool financing programs have been
established over the years to help local governments
fund various types of improvements. Some pro-
grams focus on specific types of projects, others on
specific types of organizations; some are instrumen-
talities of states, while others are single-purpose
organizations supported by quasi-governmental or
other organizations dedicated to serving local gov-
ernment entities. Each type of organization can play
an important role within the context of a state’spublic safety, economic development, or other pub-
lic interest needs.
The state-sanctioned municipal bond bank struc-
ture began in the late 1960s, and through a variety
of names state bond banks have offered varied pro-
grams over the past 35 years. Although the number
of bond banks has not risen substantially, many
have seen a significant evolution and expansion of
their programs. While the security and structure of
bond bank pools varies considerably, these pools
typically benefit from the fact that a state agency
administers the program; this often brings stronger
oversight powers or special security features con-
tained in statutes. Bond banks may be more willing
or more able than nonprofit or quasi-governmental
entities to cure program imbalances if shortfalls
occur. Relative to state revolving fund programs,
however, bond banks may be more susceptible to
changes in levels of state support.
Quasi-governmental pools are typically spon-
sored or administered by state level organizationsLong-Term Municipal Poolshttp://www.standardandpoors.com 47Assume pool default rate of 40%, with 90% recovery after four years
AB C DE FG
Payments Recovery Net Defaulted
(due to be Default rate (%) rate (%) default Defaulted debt
received before Debt 25% of 40% Four-year rate (%) payments ($) service ($)
Year defaults) ($) service ($) each year recovery lag (C–D) (E–A) B–(A–F)
1 5,000,000 4,000,000 10 N/A 10 500,000 N/A
2 5,000,000 4,000,000 20 N/A 20 1,000,000 N/A
3 5,000,000 4,000,000 30 N/A 30 1,500,000 500,000
4 5,000,000 4,000,000 40 N/A 40 2,000,000 1,000,000
5 5,000,000 4,000,000 40 9 31 1,550,000 550,000
6 5,000,000 4,000,000 40 18 22 1,100,000 100,000
7 5,000,000 4,000,000 40 27 13 650,000 N/A
8 5,000,000 4,000,000 40 36 4 200,000 N/A
9 5,000,000 4,000,000 40 36 4 200,000 N/A
10 5,000,000 4,000,000 40 36 4 200,000 N/A
11 5,000,000 4,000,000 40 36 4 200,000 N/A
12 5,000,000 4,000,000 40 36 4 200,000 N/A
13 5,000,000 4,000,000 40 36 4 200,000 N/A
14 5,000,000 4,000,000 40 36 4 200,000 N/A
15 5,000,000 4,000,000 40 36 4 200,000 N/A
16 5,000,000 4,000,000 40 36 4 200,000 N/A
17 5,000,000 4,000,000 40 36 4 200,000 N/A
18 5,000,000 4,000,000 40 36 4 200,000 N/A
19 5,000,000 4,000,000 40 36 4 200,000 N/A
N/A—Not applicable
Table 2Example Of Applied Default And Recovery Rate For Municipal Pool