Colorado (State of) -- Moody's assigns Aa2 rating to State of Colorado's Building Excellent Schools Today (BEST) Certificates of Participation Series 2012H

New York, November 14, 2012 --

Moody's Rating

Issue: Building Excellent Schools Today Certificates of Participation Tax Exempt Series 2012H; Rating: Aa2; Sale Amount: $174,800,000; Expected Sale Date: 11/27/2012; Rating Description: Lease Rental: Appropriation

Opinion

Moody's Investors Service has assigned a Aa2 rating and stable outlook to the State of Colorado's$174.8 millionBuilding Excellent Schools Today (BEST) Certificates of Participation, Series 2012H. The proceeds of the certificates, together with local matching dollars, will be used to finance school construction projects. The certificates are payable from appropriated state lease payments, under master and supplemental financing lease agreements, on parity with earlier series of BEST certificates. The prior series are also rated Aa2. Following the issuance of the Series 2012H COPs, $692 million BEST COPs will be outstanding.

SUMMARY RATING RATIONALE

The Aa2 rating on the BEST bonds is one notch below the state's issuer rating of Aa1, which is based on the state's strong long-term economic performance, its higher-than-average income per capita, and its low relative debt levels. The state's ratings also reflect constitutional restrictions and voter initiatives which constrain its budgeting flexibility. The BEST COPs rating also reflects the limited, subject to appropriation, nature of the state's payment obligation and the state's established track record of making appropriation-backed debt payments under similar financing agreements.

STRENGTHS

* State statutes specifically authorizing BEST program and lease-purchase financing.

* Statutory limits on the amount of additional issuance under the BEST program.

* State's covenant to request annual appropriation in amounts equal to gross lease payments, and its reliance on appropriation-backed debt for other capital financings .

* Low debt ratios. CHALLENGES * COP payments subject to legislative appropriation.

* Complex system of constitutional revenue limits and spending requirements, reflecting an active voter initiative process in the state; voter approval is required for any state tax increase.

* Lack of certain financial management best practices, such as consensus revenue forecasting.

* Narrow GAAP-basis reserves, despite positive revenue trend and improved budget-basis reserves.

OUTLOOK

The outlook for Colorado's certificates of participation is stable. The state has a history of timely appropriations for lease payments and generally conservative fiscal practices, including minimal debt. The economy is showing positive trends and we expect Colorado to benefit from its low-cost business environment.

WHAT COULD MOVE THE RATINGS--UP

* Strong economic and revenue growth leading to greater budgetary flexibility and reserves

* Trend of state voter actions indicating value placed on maintaining state's fiscal health and flexibility.

WHAT COULD MOVE THE RATINGS--DOWN

* Any new weakening of GAAP-basis fund balances from currently narrow levels.

* Significant weakening in liquidity.

* Trend of voter actions that further constrain the state's fiscal flexibility.

* A return to reliance on non-recurring actions to balance budget.

The principal methodology used in this rating was Moody's State Rating Methodology published in November 2004. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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