Bond-rating agency worried about LTUSD
August 14, 2009
Fitch Ratings says the Lake Tahoe Unified School District has earned a continued “A+” rating for its bonds, but the rating agency worries about the district’s ability to cope with state budget cuts.
In a report issued Thursday, Fitch Ratings said the school district’s management has been strong and has shown the ability to reduce expenditures to keep pace with cuts in state aid.
But the ratings agency said it worries about the district’s ability to keep enough money in reserves. It said reduced reserves might threaten the district’s bond rating – which would translate into higher borrowing costs in the future.
Headquartered in New York, Fitch is one of the major bond-rating agencies in the world.
Even though the district undertook layoffs, Fitch estimated that the district’s reserves stood at $1.7 million at the end of its last fiscal year compared with $3.7 million a year earlier.
Put another way, that means that reserves recently amounted to 4.7 percent of the district’s spending as compared with 7.2 percent a year earlier.
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“Management has prudently set aside reserves outside of the general fund and is prepared to further reduce expenditures,” Fitch analysts Jonathan Bdner and Jessalynn Moro wrote. “Given state funding reductions, expenditure controls will be crucial to sustaining the current reserve levels.”
Assessed valuation in the district has slowed to 1 percent annually and is expected to slow even more, the Fitch analysts said. Enrollment declines, meanwhile, are expected to continue for at least four years.