Sac City Unified schools downgraded to near rock-bottom bond ratings amid budget crisis
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Amid a budget crisis, Sacramento City Unified School District bonds have been downgraded to near rock-bottom ratings, district officials said.
The rare low ratings from the Standard & Poor’s agency come weeks after the district announced it expects to run out of money by November 2019, after months of financial crisis.
S&P Global Ratings credit analyst Dan Kaplan said the magnitude of the district’s deficit was projected to grow over time.
“The lowered rating reflects our view of the district’s weakened financial position, specifically, its forecasted negative fund balance and structural imbalance in fiscal 2020, which we think may continue to deteriorate over the next two years if sustainable expense reductions are not implemented,” Kaplan was quoted in the agency’s ratings action summary.
Sacramento City officials said in a statement Wednesday that the new ratings indicate the district is at even more risk, and its interest payments will be higher for bonds issued under the downgrade.
“Increased interest rates and bond costs will create an increased burden for the taxpayers who voted to support bond initiatives for capital improvement projects,” the statement read. “The district must prioritize projects and consider whether bonds to pay for those projects should be issued in the near future given the financial risk involved.”
The downgrade will not have an impact on the district’s general fund, or interest rates on existing general obligation bonds.
According to Standard & Poor’s report, the agency downgraded the district’s general obligation rating four notches — from a midrange “A+” to “BBB.” The agency downgraded the district’s lease bonds two notches below “BBB” to a “BB+.”
Kaplan noted that the Financial Crisis and Management Assistance Team, an organization that provides financial analysis to school districts, issued a report to Sacramento City Unified saying it must immediately cut least $30 million from its budget. The district has identified only about a third in savings.
The ratings could drop even further if the district is unable to make significant reductions by the CONTINUE READING: Sacramento City Unified’s bond ratings downgraded | The Sacramento Bee
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