Financial firm downgrades ratings on LTUSD bonds
A New York-based financial firm has downgraded the ratings of Lake Tahoe Unified School District’s general obligation bonds, but the change will have almost no impact on the district, officials said Tuesday.
Moody’s Investors Service announced in mid-November that it had lowered the ratings of the bonds one notch because of the district’s weak cash reserves and previous declines in enrollment, according to a report.
“While the funding environment for the District is expected to improve slightly due to stable enrollment and a reduction in funding deferrals from the state,” the summary said, “it will likely take the District a while to replenish its reserves back to levels consistent with medians.”
Debbie Yates, chief financial officer for LTUSD, was surprised by Moody’s findings because the district had already budgeted for “rough storms ahead,” she said.
“From my perspective, I was disappointed,” Yates said. “I think we run a pretty tight ship here, even with the ending fund balance.”
Moody’s spokesperson David Jacobson said the reduced rating is still a top five rating in the corporation, but the downgrade could impact payments of future obligations.
“It could mean that if the school district wants to issue any debt in the future,” he said, “it could have to pay a higher interest on that debt.”
But according to Yates, the lower rating on the bonds has no major effects on the district, including paying back its $79.7 million bonds debt.
“Since we have already sold all of our bonds, there’s basically no impact on the district,” she said. “Had we still had bonds to sell, it would have meant a higher cost of issuance.”
The amount of available cash in the district has dropped sharply in the past four fiscal years, falling from $2.7 million in 2009 to about $461,000 in 2012, Moody’s reported.
It rose to about $590,000 in fiscal year 2013, based on unaudited figures. But despite enhanced funding from the state, the research firm expects the district’s financial profile “to remain relatively weak” in the upcoming years, the report stated.
“Going forward, the District will benefit from the new state funding formula and should be able to balance its financial operations,” according to the document, “However it will likely take the District a while to grow reserves to levels consistent with higher rated districts.”
The district has also dealt with rapid enrollment decline, Moody’s reported. In the past 10 years, the student population was reduced by 40 percent. Enrollment for the 2014 fiscal year is about 3,800 students.
On the other hand, several factors were considered strengths in the district. For starters, the district carries an above-average debt burden.
“The district’s above average direct debt burden is 1.4 percent of AV,” according to the report, which stated the district’s assessed value for fiscal year 2014 is $5.8 billion, “but we feel the debt burden is manageable given the district’s strong AV per capita.”
Also a strength is the district’s moderately sized tax base, which is anchored in a tourism-centered economy, Moody’s reported.