Cherokee County’s school superintendent called Moody’s bond rating service’s AA2 and AA1 enhanced ratings positive indicators for the school district’s financial status.
AA1 and AA2 are defined by Moody’s as “judged to be of high quality and are subject to very low credit risk.”
The bond rating, which was issued Wednesday, impacts the school district’s cost to borrow money.
“The school board two years ago approved a new policy, which I recommended, to increase cash reserves levels, and this year’s budget was balanced without the need to use reserves,” Superintendent of Schools Dr. Frank Petruzielo said. “This policy and increasing commercial growth, such as the new outlet mall, announcements of more major retail openings and the replacement Northside Hospital-Cherokee and surrounding development under construction, are positive indicators for the school district’s current and future financial status, as is this positive report from Moody’s.”
Moody’s AA1 enhanced rating pertains to U.S. municipal securities, and the report from July 30, stated that “the outlook on the enhanced rating is stable.”
Moody’s said the Cherokee County School District AA2 rating has a negative outlook due to “narrow General Fund reserves challenged by limited revenue raising flexibility” and an “above average debt burden that is not fully supported by SPLOST revenues and is expected to increase.”
Moody’s said they also considered the declines in property value and limited General Fund reserves in their report.
Assistant Superintendent of Financial Management Candler Howell said Friday the report confirms what he and the staff have told the board.
“The Moody’s report confirms what we and our bond underwriter and financial advisers repeatedly have reported to the School Board: while our ratings have been affected by the economic downturn just like every school district that relies on property and sales taxes for funding, our bond rating remains outstanding,” Howell said. “As the Moody’s report of July 30, 2013, states, the school district was able to realize an increased fund balance through a slight increase in property values, ongoing annual expenditures reductions and conservative budgeting, and that is as a result of our ‘zero sunset review’ budget formulation, personal sacrifices by our employees through furlough days and the support of our School Board.”
The ratings of AA1 and AA2 are the second and third highest ratings by the agency, and the district had an AAA, the highest rating, before the economic downturn.
“Our school district since 2008 has weathered its most challenging economic situation in the last 50 years, and has done so through the accurate budgeting and accounting of tax dollars by our Office of Financial Management and the strong stewardship by the school board,” Petruzielo said. “As our local tax digest slowly recovers, and if the state continues to reduce its ‘austerity budget cuts’ and returns to fully funding the legally required QBE formula, the school district’s financial position and credit rating will continue to improve.”
Moody’s report said factors that could make the rating go up or remove the negative outlook include: returning to structurally balanced financial operations, maintaining adequate reserve levels and increasing SPLOST collections to reduce the use of fund balance for debt payments.
The report stated that “further declines in assessed valuation” or “continued operational deficits resulting in further reductions in reserves” could make the rating go down.