The notes, which have a maturity date of
In addition, Fitch has affirmed the following ratings:
The Rating Outlook is Stable.
The Authority's bonds are secured by an irrevocable dedication of
The 2014 series A BANs will be paid from proceeds of a planned
KEY RATING DRIVERS
SHORT-TERM RATING: The 'F1+' rating on the notes reflects the strong likelihood of market access to redeem the notes by the issuance of long-term dedicated sales tax bonds that already have been authorized for this purpose.
BROAD DEDICATED REVENUE SOURCE: The bonds are secured by an irrevocable dedication of
STRONG STRUCTURAL PROTECTIONS: Bondholders benefit from the statutory dedication of the tax for school capital purposes. Dedicated revenues are segregated from the Commonwealth general fund, and the Authority has no role in funding school operations. Strong legal covenants protect against diversion of revenues or lowering of the tax rate, although the base can be changed.
ADEQUATE COVERAGE: Both current debt service coverage and the additional bonds test are adequate.
STRONG AND WEALTHY ECONOMY:
SUBORDINATED BOND RATING LOWER: The lower rating on the subordinated bonds reflects the junior pledge to the senior bonds and the difference in the additional bonds test protections on the two liens. Additional issuance requires 1.4x maximum annual debt service (MADS) coverage for the senior bonds compared to 1.3x aggregate coverage for the subordinated bonds.
The ratings are sensitive to the performance of the pledged sales tax revenue and the maintenance of solid debt service coverage levels.
The 2014 series A notes will be the first BANs to be issued by the Authority, which has come to market with ten series of bonds to date. Note proceeds will fund grants to school districts for school construction, renovation and repairs.
The BANs will be paid from proceeds of a planned early
The Authority's long-term bond ratings are based on the historical reliability of sales tax revenue, the adequacy of debt service coverage and the additional bonds test, and structural protections afforded, including the statutory dedication of the tax for school capital purposes. The Commonwealth has imposed a sales tax since 1966, and although performance in the recession was weak, coverage of MADS remains solid at 1.9x for senior bonds and 1.8x for aggregate debt service, based on fiscal 2014 revenues and without consideration of the federal interest subsidies associated with Build America Bonds and Qualified School Construction Bonds. Sales tax revenue results are much improved since the recession, with a 6.8% year-over-year increase expected for the current fiscal 2014, which ends on
Additional bond issuance under a
Dedicated sales tax revenues are credited to the
The dedication of the full
The Authority can choose to transfer excess dedicated sales tax revenues to the Commonwealth, but the Commonwealth has relinquished all claims to the revenue. The Authority consists of seven members: the Commonwealth Treasurer (chair), four treasurer appointments, and two ex-officio members. The authorizing legislation specifies that the treasurer shall act as trustee as it relates to the SMART fund and not on account of the Commonwealth.
The Authority was created in 2004 to address a substantial backlog of programs funded under the Commonwealth's prior school building assistance program and create a sustainable system for school capital funding going forward. Prior contract assistance commitments to localities, a declining obligation through 2023, are paid annually from dedicated revenues after payment of debt service. The Authority was authorized to fund up to
As pledged revenues are segregated from general operations of the Commonwealth, bond security is driven by performance of the sales tax and therefore closely linked to economic performance in the state.
The Commonwealth's economic performance in the recent recession was significantly better than the national experience, in contrast to 2002-2004 when
For more information on the Commonwealth, see Fitch's press release 'Fitch Rates $500MM Massachusetts GO Bonds 'AA+'; Outlook Stable ' dated
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's report 'Tax-Supported Rating Criteria', this action was additionally informed by information from
--'Rating U.S. Municipal Short-Term Debt' (
--'Tax-Supported Rating Criteria' (
--'U.S. State Government Tax-Supported Rating Criteria' (
Rating U.S. Public Finance Short-Term Debt
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
Source: Fitch Ratings
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