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The following is a press release from Moody's Investors Service: Aa3 RATING AFFECTS $104.53 MILLION OF DEBT Orleans Parish School Board, LA Primary & Secondary Education Louisiana Moody's Rating Issue Rating General Obligation School Refunding Bonds, Series 2010 Aa3 Sale Amount $104,530,000 Expected Sale Date 07/26/10 Rating Description GOULT NEW YORK, July 15, 2010 -- Moody's Investors Service has assigned an initial Aa3 rating and stable outlook to the Parishwide School District of the Parish of Orleans, State of Louisiana $104.5 million General Obligation School Refunding Bonds, Series 2010. Assignment of this high quality rating reflects a local economy that has shown significant recovery but is still rebuilding in the aftermath of Hurricane Katrina which made landfall in the City on August 29, 2005. Following Katrina, the public school system in New Orleans was immediately reorganized so that the academically struggling schools were placed with a Recovery School District and the performing schools stayed with the School Board. The Board has all of the outstanding debt of the larger system and has the only authority to levy the tax to repay bondholders. The current refunding will shorten scheduled maturities from twelve to ten years and will produce significant net present value savings. With employment, population, and assessed valuation increases, we believe the size and diversity of the tax base are commensurate with the Aa3 rating category. Additionally, the Aa3 rating assignment reflects a favorable financial position that was achieved as a result of the hurricane and the reorganization. Finally, the rating also reflects manageable debt profile as no future plans for debt given the new school facilities that will be constructed primarily from FEMA funding and prudent management. We note that in the medium to long term, the Board could consolidate and operate again as a larger system. In the event the merging of the two districts creates a negative financial impact on the Board, downward pressure would be placed on the rating. A High Profile Report will be published the week of July 12, 2010 to provide more in-depth information regarding the Orleans Parish School Board. GOVERNANCE OF THE ORLEANS PARISH SCHOOL SYSTEM The Parishwide School District of the Parish of New Orleans, State of Louisiana is governed by the Orleans Parish School Board. Hurricane Katrina made landfall on August 29, 2005 which was devastating to the New Orleans MSA including the operations of the District. Immediately following the Hurricane, a majority of the Board's employees were put on Disaster Leave and on March 24, 2006, nearly all of the employees were terminated and the Board announced that the school system would remain closed indefinitely. The District had several schools that were struggling academically before the storm. After Katrina, the State took action by passing Act 35 of the Louisiana Legislation which transferred control of each school deemed to be in academic crisis, as determined by standardized student testing results, to the Louisiana State Department of Education's Recovery School District (the "RSD"). Officials at the District stated that they have been able to develop a strong school system with the separation of the District and the RSD and while the District could eventually administer all of the public schools again, they will only do so with careful planning that will sustain successful academics and healthy financial operations. Assignment of the Aa3 rating reflects the historical and current conditions of the Board and the district it operates to-date. We recognize that the Board will likely evolve over time and could again become a much larger system. Negative material events to the Board as this occurs could result in future downward rating adjustments. TAX BASE BENEFITS FROM REBUILDING FOLLOWING KATRINA The Orleans Parish School Board serves the City of New Orleans (GOULT rated A3) and the local economy is still recovering from the damage caused by Hurricane Katrina. The estimated population of the Parish is 354,850 which is approximately 73% of the pre-storm level. The Parish's 2000 Census per capita income of $17,258 was equal to a 102% of the State but a weaker 79.9% of the US. Unemployment in the Parish was 7.2% for March of 2010 with the State equal to 50 6.2% and US equal to 10.2% for the same period. The local economy continues to be driven by the port, tourism, and oil and gas. While the BP oil spill will likely affect the New Orleans economy with unemployment and sales tax collections, the indicators to-date do not yet reflect the extent of the impact. Rebuilding since Katrina continues and has benefited the District's assessed valuations. Although there was a significant 22% decline in the assessed valuation following the storm, increases in the subsequent years have driven the total tax base to surpass the pre-storm amount. In fiscal 2008, a reassessment year, values increased 37.8% over the prior year. The full valuation in fiscal 2010 increased another 8.8% reaching a sizable $23 billion. The ten largest taxpayers are diverse comprising 11% of the total tax base and include two utilities, three banks, one hotel, one retail/hotel mixed use project, and two commercial real estate developments. While we recognize that the wealth levels are somewhat weak for the Aa3 rating category, the size and diversity of the tax base and the local economy are mitigating factors. FAVORABLE FINANCIAL RESERVES IN THE GENERAL FUND Operating revenues are primarily supported 40% from ad valorem taxes, 31% from sales taxes and 21% from State funding. The state funding formula is driven by enrollment figures. Prior to the storm, enrollment was 63,702 and is now a combined 35,648 with 10,040 enrolled in the District and 25,608 enrolled in the RSD. The Board collects all of the revenues and then they are allocated based on a per pupil amount. The Board retains only about 7% of revenues with the remainder going to the RSD and Charter schools. The State of Louisiana is currently rated Aa2 with a stable outlook. Over the last four years, the Board has maintained an unreserved General Fund balance equal to at least 25% of total system wide revenues although the total General Fund balance has fluctuated. In fiscal 2008, the total General Fund balance decreased from a sizable $138 million to $73.9 million due to $39.3 million in capital outlay, a $7 million lawsuit settlement, and a recalculation of $21 million to the Recovery School District for its share of local revenues. The unreserved portion of the fund balance decreased from $92 million or 51% of General Fund revenues to $72.4 million which was equal to 32.4% of General Fund revenues. In 2009, the audited financial statements reflect a General Fund and a Pass-Through Fund whereas total revenues for the Parishwide school system were previously reflected in the General Fund. The Pass Through Fund is used to show all of the revenues collected for the District and for the Recovery School District. The revenues are then transferred out to the respective entities and the General Fund is used to reflect the revenues and expenses of the District only. In 2009, the General Fund had a total balance of $54.2 million which was a strong 32% of total revenues and 112% of General Fund only revenues. The fund balance decreased in 2009 from $73.9 million for reasons including a $5.9 million recalculation of the local revenues paid to the Recovery School District from the 2008 fiscal year. Additionally, $6.2 million in payments to the Charter Schools were in excess of the actual amount received given that the per pupil amount for charter schools was higher than the per pupil amount that was received by the Board. This has been fixed for future years with the passage of House Bill 420 which provides legislation to equalize the funding among the different educational entities (Orleans Parish School Board, Recovery School District, and Charter Schools). Finally, there were over $7 million in legacy costs associated with workers compensation claims and health care costs for retirees that were anticipated and budgeted to come from the reserve. Senate Bill No. 240 was recently passed to meet these ongoing costs for the next twenty years without continuing to pressure the Board's fiscal operations. The budget for fiscal 2010 reflects an unreserved fund balance of $51.3 million. Five-year projections provided by the Board reflect that the unreserved General Fund balance will remain close to $50 million. The Board has a goal of maintaining nine months of unrestricted General Fund revenues in the General Fund balance which would approximate $27 million and is consistent with the Aa3 rating category. Sales tax revenues have fluctuated in the last four fiscal years since Katrina. In fiscal 2007, sales tax revenues increased 38% over the prior year following a 28.8% decrease in fiscal 2006. The increase was driven by the recovery that was taking place after the hurricane. However, sales tax revenues began to normalize with a slight 1.1% decrease in fiscal 2008 and then in-line with the national recession, sales tax revenues declined 9.3% in fiscal 2009. Sales tax revenues are projected to end with an amount similar to the 2009 level for fiscal 2010. We believe that the District has established healthy reserves supported by prudent fiscal management and policies that have been adopted to provide for stable operations over time. Additional information about the School Board's financial operations is provided in the High Profile Report. (MORE TO FOLLOW) Dow Jones Newswires July 15, 2010 12:31 ET (16:31 GMT)