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U.S. PUBLIC FINANCE

The guidance below for assigning instrument-level ratings is divided into two groups of pledges that are
typical in the K-12 sector: (i) real property-based pledges; and (ii) non-contingent general promises to pay
and contingent obligations.

Real Property-based Pledges
In a real property-based pledge, the issuer pledges taxes that are levied on real property or other real
property-related revenue. These pledges can be active or passive but are, by definition, non-contingent.

Examples of real property-based pledges include general obligation unlimited tax (GOULT) and general
obligation limited tax (GOLT) pledges. Because the taxes associated with these pledges are levied on real or
tangible property, GOULT or GOLT pledges have historically been among the most stable debt pledges.

Overall, a major consideration for all securities within the real property-based pledge grouping is whether
the school district can adjust without limit the tax rate that generates the pledged revenue. We also
consider how meaningful the limitation is. Where we consider the limitation to be material, the instrument
rating is typically one notch below the issuer rating.

34 JANUARY 26, 2021 RATING METHODOLOGY: US K–12 PUBLIC SCHOOL DISTRICTS