Business Services Industry

S&P Rts Calif St Univ&Coll/CA Poly St U. Revs A- SPUR

Business Wire, July 21, 1998

NEW YORK--(BUSINESS WIRE)--July 21, 1998--Standard & Poor's today assigned its single-'A'-minus underlying rating (SPUR) to California State University & College's student union revenue bonds series B dated Aug. 1, 998 due Nov. 1, 2025, issued for California Polytechnic State University at San Luis Obispo. The bonds are scheduled to sell Aug. 5, 1998.

The rating reflects:

-- A broad pledge of unlimited student union fees that secure the bonds; -- Strong debt service coverage of 7 times (x) by student union fees charged to all students on the San Luis Obispo campus; -- Solid demand for the university's programs with good growth in applications and excellent matriculation rates; and -- The California State University's (CSU) strong general creditworthiness, with its status as the nation's largest system of higher education (343,779 fall 1997 enrollment) and its stabilized funding outlook.

Bond proceeds will be used to construct six lighted multiple purpose athletic fields on the San Luis Obispo campus. This construction is part of a $9.4 million campus sports complex, which will include a baseball stadium and softball stadium. Financing for the stadiums will be provided by through a line of credit by the California Polytechnic State University Foundation. San Luis Obispo's series A and B bonds are secured by current student union fees of $189 per year which are assessed to all enrolled students. This fee will be increased to $243 per year in fiscal year 1998-1999. Student union fees of $3.2 million in fiscal 1997 provide 7x coverage of maximum annual debt service. The unlimited student union fee pledge is strengthened by a fully funded debt service reserve and a 1.2x rate covenant that requires trustees to raise fees if necessary. San Luis Obispo, the eleventh largest of CSU's 23 campuses in terms of enrollment, offers a broad array of programs and confers bachelors degrees in 58 disciplines and masters degrees in 18 disciplines. Historically, San Luis Obispo has had a strong focus on practical, teaching oriented programs in applied technical and professional fields. San Luis Obispo is highly selective with acceptance rates of 32%. Application growth has been strong with applications increasing 29% from fall 1993 to fall 1996. Matriculation rates are excellent and have improved, rising to 83% in fall 1996, from 81% in fall 1993. These trends have resulted in an 8% increase in headcount enrollment to 16,735 in fall 1997, from 15,449 in fall 1993

As a component of the CSU system, San Luis Obispo is administered locally and overseen centrally. CSU receives annual general fund appropriations which represent approximately 51% of its operating budget. The 1998-1999 budget provides a 8.5% general fund increase of $162.9 million resulting in a general fund allocation of $2.06 billion. The increase includes $73 million as part of the final year of the governor's four-year compact agreement which raises general funding for all higher education in the state. The appropriation increase also includes monies to offset revenue declines due to a 5% decrease in systemwide fees to $1,506 per year.

OUTLOOK: POSITIVE Since CSU receives general fund appropriations that represent over 50% of its operating budget, the rating is partially linked to California's rating (single-'A'-plus; outlook:positive.) The outlook reflects the anticipation of continued progress toward elimination of the state's accumulated deficit, and budget process reform encompassing effective mid-year budget adjustment mechanisms, Standard & Poor's said. - CreditWire