In a June 13 report, the New York-based rating agency lowered the district’s series 2007 general obligation bonds from AA-/Negative to A+/Stable “due its view of the district’s inconsistent financial performance and inability to maintain adequate reserves.”
But even as it lowered the rating, Standard & Poor’s cited a stable financial outlook for the district and noted the reforms implemented by Superintendent Cheryl Atkinson, the district’s debt burden is low, and said its overall net debt represents roughly $1,000 per capita and 1 percent of market value.
Standard & Poor’s said that the 2007 general obligation bonds will be fully retired in fiscal 2013 but that the district has about $115 million of capital leases and certificates of participation outstanding. It also noted that the metro Atlanta region continues to feel the lingering effects of the economic downturn, characterized by high unemployment, limited development activity, decreasing home values, and a high incidence of foreclosures.
“Correspondingly, the district’s historically strong property tax base growth has eroded, with the 2012 net maintenance and operations digest of $17.6 billion representing a 14 percent decrease from fiscal 2011 and a 20 percent decrease from its peak value in fiscal 2009,” the agency said. “We understand that officials expect an additional 9 percent digest reduction for fiscal 2013.”
Even though the district had alerted Standard & Poor’s to the 9 percent digest reduction, at its June 11 meeting, the School Board delayed a vote on its 2013 budget claiming that it had just found out that the county’s property digest had declined 9 percent, increasing its budget deficit by $12 million to $85 million.
The rating agency said that full market value of the district’s tax base is currently estimated at $51 billion, “still yielding what we view as a strong $75,000 per capita.”
It made note of the fact that during fiscal 2012, the school district announced that budgeting errors related to debt service payments on its Series 2007 bonds led to a $40 million shortfall in SPLOST funds earmarked for various pay-as-you-go projects.
“However, we understand that all debt service payments have been made on time and in full and officials closed the shortfall through the cancellation and delay of certain projects,” it said. “We do not believe this issue will have a material impact on the district’s future ability or willingness to meet its debt service obligations.”
Atkinson put a positive spin on the lowered rating.
“During tough financial times, we are taking strong steps to balance our budget, re-establish our reserve fund and strengthen our finances,” she said in a district statement. “Standard & Poor’s has indicated that the district is moving in the right financial direction, and by taking the appropriate actions, we expect the district’s credit rating to continually improve.”
For more information about the DeKalb School District, visit www.dekalb.k12.ga.us.