NEW YORK--()--Fitch Ratings has assigned an 'AA+' rating to the following Virginia College Building Authority (VCBA, or the authority) bonds:
-- $392,185,000 educational facilities revenue bonds (21st Century College and Equipment Programs) series 2012B.
The bonds are expected to sell through competitive bid on Nov. 28, 2012.
Fitch has also assigned an 'AA+' rating to $8,390,000 educational facilities revenue federally taxable bonds (21st Century College and Equipment Programs) series 2012C that will be privately placed with the Bank of America, N.A. Proceeds will provide funding for two projects that do not qualify for tax-exempt financing.
In addition, Fitch has affirmed the 'AA+' rating on the authority's outstanding educational facilities revenue bonds (21st Century College and Equipment Programs) and educational facilities revenue bonds (Public Higher Education Financing Program).
The Rating Outlook is Stable.
The bonds are limited obligations of the authority, payable from appropriated funds of the commonwealth's General Assembly.
KEY RATING DRIVERS
APPROPRIATION RATING LINKED TO COMMONWEALTH: Debt service is funded from direct payments made by the commonwealth of Virginia pursuant to a payment agreement, subject only to legislative appropriations, resulting in a rating one notch below Virginia's 'AAA' general obligation (GO) rating.
CONSERVATIVE COMMONWEALTH FINANCIAL MANAGEMENT: The commonwealth's financial operations are conservatively managed with periodic revenue forecast updates and a constitutional revenue shortfall reserve. Revenue performance has improved considerably since the recession and deposits to the state's reserve fund are budgeted per policy during the current biennium.
DIVERSE ECONOMY WITH HIGH WEALTH LEVELS: The commonwealth benefits from a diverse economy with relatively low unemployment and high wealth levels. Reductions in government sector employment over the next few years are likely as the federal government contracts.
BELOW-AVERAGE DEBT LEVELS: Virginia's debt ratios are in the lower-moderate range, maintained through deliberate policy and above-average amortization. Capital needs for education and transportation improvements remain significant.
PENSION FUNDING REFORMS: The funded status of Virginia's retirement system has declined in recent years, due in part to an underfunding of actuarially required contributions to the system. The commonwealth has adopted a series of pension reforms that are expected to result in increased contributions to the system and limit further growth in the state's pension liabilities in the coming years.
The bonds are payable under a master indenture from amounts appropriated by the Virginia General Assembly, pursuant to a payment agreement. The bonds offered are the 27th and 28th parity series under the 1996 master indenture and will finance capital projects and equipment acquisition for the commonwealth's public higher education institutions. The projects have been legislatively approved and involve central commonwealth agencies, including the authority and the commonwealth's treasury board, which approves all bond issues payable from commonwealth appropriations. The higher education system has broad state support.
The commonwealth's 'AAA' GO bond rating reflects its substantial economic resources, conservative approach to financial operations, and lower-moderate debt levels. For more information on the commonwealth's GO rating, please see the Fitch release titled 'Fitch Rates VA Public School Auth School Tax Credit Bonds 'AA+'; Affirms VA GOs at 'AAA' dated Oct. 4, 2012 and available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
-- 'Tax-Supported Rating Criteria' (Aug. 14, 2012);
-- 'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria