Saline schools' bond rating downgraded due to deficits, low cash reserves
Moody's Investor Service has downgraded Saline Area Schools' bond rating, according to a report in the Saline Post.
According to a report on Moody's website, the district was downgraded due to its multi-year trend of operating deficits that resulted in decreased general fund reserves or fund balance, the school district's primary savings account.
Saline Area Schools passed a $52 million operating budget for the 2013-14 academic year that restored $97,215 to the district's fund balance, bringing the total account back up to $2.59 million, about 5.13 percent of Saline's general fund.
Moody's summarized Saline schools' bond ratings strengths as: a large tax base located near Ann Arbor (which is rated Aa1), an affluent demographic profile and recently enacted expenditure reductions expected to improve financial operations.
The Moody's report highlights that a significant increase in fund equity or a reduction in the district's debt burden could move the bond rating up. The effect of a lower bond rating is higher interest rates when borrowing money and a greater difficulty in being approved for loans or lines of credit.
Contraction of the tax base, erosion of the demographic profile or further spending of the district's fund equity could move the rating down, according to the report.
Danielle Arndt covers K-12 education for AnnArbor.com. Follow her on Twitter @DanielleArndt or email her at daniellearndt@annarbor.com.
Comments
stunhsif
Tue, Jul 16, 2013 : 1:23 p.m.
Thank goodness for Holden and Zimmer, without them Saline schools would really be in trouble. Moving forward, there must be more cuts to the fat in the teachers contracts. Step raises need to go, there must be cuts in the number of sick days, professional days etc. Retirement age must go to at least 62 before collecting pension. The defined pension benefit must be dumped for any employees with 10 years or less and employees must pay an equal amount into their healthcare benefits as the average private sector worker. I for one will vote no on any millage moving forward until we see more shared sacriface by the public sector unions.
grye
Tue, Jul 16, 2013 : 1:44 a.m.
More reason that all the school systems in the county bond together and share support services to reduce overhead costs.
nickcarraweigh
Mon, Jul 15, 2013 : 11:46 p.m.
That star-crossed, woebegotten community has been taking it on the chin seems like for years now. Let's all hope this is only a molehill, and not a jagged cliffside rushing at you through the airliner porthole.
Tom Todd
Mon, Jul 15, 2013 : 10:59 p.m.
Moodys trying to encourage more charters
a2xarob
Mon, Jul 15, 2013 : 9:35 p.m.
I think this is exactly what Ms. Stead has been warning about in Ann Arbor: running deficits and dipping deeply into fund equity. And downgrading of bonds is only the half of it.
Nicholas Urfe
Mon, Jul 15, 2013 : 9:22 p.m.
This downgrade brings up two questions: First, is the a2 district at risk of a rating downgrade, given their current unknown and un-audited budget situation? Second, will the proposed county bond to fund the pension liabilities impact the county's credit rating?
Nicholas Urfe
Mon, Jul 15, 2013 : 10:19 p.m.
The followups, of course, relate to what active planning is in progress to prevent downgrades. What steps are being identified, what are the tradeoffs, who is studying, etc.
Mike
Mon, Jul 15, 2013 : 9:36 p.m.
Excellent questions..............most likely both will be affected in the no-so-distant future.