New York State Aid Intercept Program (‘A’)
Governing statute: Section 99b of the state finance
law authorizes the aid withholding and specifies the
procedures that would be followed should the state
be required to make a debt service payment for a
program participant. This rating will not typically
move with that of the state.
Eligibility requirements: All school districts are
eligible for this program.
Program provisions: Upon notification of a default
by a school district, the state comptroller is required
to deduct from the next state aid payment due to the
school district an amount sufficient to meet any defi-
ciency in debt service. If this aid payment does not
cover the obligation, the balance would be deducted
from the succeeding allotment. The funds would be
forwarded directly to the paying agent, and the
comptroller would notify the school district of the
payment. A technical default can occur on New York
school district GO bonds, as the state finance law
contains no provisions to activate the mechanism
before actual default. However, the minimum guar-
antee program reflects the fact that a prompt cure of
any such default is assured.
Additional Standard & Poor’s requirements: A
school district’s annual state aid must cover maxi-
mum annual debt service by at least 1x.
Ohio State Aid Intercept Program (‘AA’ or ‘AA-’ rating
depending on required coverage levels)
Governing statute: Pursuant to section 3317.18 of
the Ohio Revised Code and section 3301-8-01 of
the Ohio Administrative Code, the Ohio Credit
Enhancement Program lets a school district enter
into an agreement that allows the state to withhold
state education funds due to the district under
chapter 3317 of the revised code and apply those
funds to the district’s debt service payments. Section
3301-8-01 of the Ohio Administrative Code was
revised in March 2004 to require 2.5x maximum
annual debt service coverage levels. Prior to that
time, the required coverage under the program was
1.25x. The ratings on bonds secured by the prior
version of the enhancement program will be evalu-
ated on a case-by-case basis, and issues that meet
the Standard & Poor’s requirement of 2x maximum
annual debt service coverage will be upgraded to a
‘AA’ rating. Those that do not meet this coverage
level requirement will continue to be rated ‘AA-’
For bonds issued after the program was amended in
March 2004, the ‘AA’ rating applies. Both ratings
move with the state’s rating.
Eligibility requirements: To be eligible, a district
must meet all program criteria including having the
approval of both the state department of education
and the office of budget and management to use the
security. Districts applying for inclusion in the pro-
gram must provide financial information to the
department of education and the office of budget
and management, including assessed value and tax-
payer concentration information, audits and budg-
ets, and schedules of proposed and outstanding
debt. The program excludes noninvestment-grade
rated issuers and requires an extensive review of the
credit quality of unrated districts. The district must
have an underlying credit rating determination by
Standard & Poor’s. Upon state approval, the con-
tract between the state and local school district is
irrevocable as long as any program debt is out-
standing. At the time of state approval for program
participation, projected state aid for the current fis-
cal year must be at least 2.5x the maximum annual
debt service on the enhanced debt. In addition, on
each debt service date during the current or any
subsequent fiscal year, projected state aid remaining
for that year must cover the remaining debt service
for the year by 1.25x.
Program provisions: The district must certify to
the state department of education and the paying
agent whether or not it can make its full debt serv-
ice payment 15 days before each debt service due
date. Ten business days before the due date, the dis-
trict must deposit with the paying agent an amount
sufficient to make the debt service payment. If the
district has failed to make a sufficient deposit, the
paying agent will immediately contact the state
department of education. In the event a district is
unable to make a sufficient debt service payment
and the payment will not be made by a credit
enhancement facility, the department of education
will pay the paying agent the lesser of the amount
of the debt service due or the amount of state aid
due to the district for the remainder of the fiscal
year. This payment will be made at least one busi-
ness day prior to the debt service payment date.Oregon School Bond Guarantee Program (‘AA-’)
Governing statute: The Oregon legislature passed
the school bond guaranty act in 1997 (Oregon
Laws 1997, chapter 614). This rating will move in
conjunction with that of the state.
Eligibility requirements: Participation in the pro-
gram is voluntary and open to all common school
districts, union high school districts, education service
districts, and community college districts in the state.
Program provisions: The amount of debt that can
be guaranteed by the state at any one time is limited
to 0.5% of true cash value of taxable property in
the state. The program is administered by the
Oregon State Treasury, which has established
administrative rules prescribing application proce-
dures and qualification guidelines. Upon determina-
tion of a district’s eligibility, the state treasurer issues
a certificate of qualification valid for one year fromState Credit Enhancement Programshttp://www.standardandpoors.com 97