DeKalb County school district: Credit rating stable, also wins $3 million grant from Wallace Foundation
By David Pendered
A New York credit rating agency on Tuesday assigned a top score to the $36 million bond package the DeKalb County school district intends to sell Wednesday.
Also Tuesday, the Wallace Foundation announced DeKalb as a recipient of a $3 million grant to improve the leadership skills of its principal supervisors or regional superintendents, and to increase the number of regional superintendents in order to reduce a span-of-control that now averages 27 direct reports.
Taken together, the measures mark the continuation of the district’s slow but steady improvement from situations involving its accreditation probation and fiscal management in the 16 months since the DeKalb school board first named former state Labor Commissioner Michael Thurmond as interim superintendent.
“We are honored to have been selected by the Wallace Foundation to participate in this groundbreaking initiative” Thurmond said in a statement released Tuesday. “This is a game-changer for the DeKalb School System.”
Moody’s Investors Service mentioned both the accreditation and fiscal management issues in its Tuesday rating action.
In issuing an outlook of “stable” on DeKalb school debt, Moody’s observed:
- “The stable outlook reflects the expectation that the district’s financial position will remain narrow over the next few years given limited revenue raising flexibility, and the likelihood of minimal future expenditure cuts following significant reductions over the last three years.
- “These limitations are balanced against estimates of a return to positive fund balance in fiscal 2013 and 2014. The outlook also acknowledges recent financial and managerial changes in the district.”
Moody’s continued the analysis later in the rating action:
- “The stable outlook reflects the district’s weak financial position, which is expected to remain challenged and below informal targets due to limited revenue raising flexibility and the expectation of minimal future expenditure cuts. The outlook is also based on the district’s pending accreditation review and the one outstanding lawsuit.”
Moody’s rating action was triggered by the school district’s plan to sell $36 million of short-term notes in order to cover operating costs until property taxes are collected this autumn. The sale of such tax anticipation notes are common in Georgia.
In addition to rating the planned short-term borrowing of $36 million, Moody’s affirmed two previously issued credit scores assigned to the school district’s existing debt.
Moody’s rating action said the district’s credit score benefited from a Georgia program that ensures lenders are paid even if a local district faces a shortfall:
- “The Aa1 enhanced rating is based on the additional security provided by the State of Georgia’s (G.O. rated Aaa/stable) School District Intercept Program (GSDI), under which the State Board of Education (BOE) is required to transfer state aid appropriated for each school district (including charter school systems) directly to the paying agent in case of debt service shortfalls.”
Moody’s ratings actions typically include a section in which analysts outline their view of the borrower’s strengths and challenges. In the case of the DeKalb school district, Moody’s analysts observed:
- “Sizable, diverse tax base with above average income levels;
- “Low debt burden that benefits from the use of the special purpose local option sales tax;
- “Return to positive operating performance.
- “Historically below average reserves that remain challenged due to state aid cuts and a tax cap;
- “Pending accreditation status.”
The Wallace grant is provided by the foundation created by the founders of the Reader’s Digest Association, DeWitt and Lila Acheson Wallace.
The Wallace Foundation is funding a $30 million Principal Supervisor Initiative in a total of 14 urban school districts nationwide. DeKalb was chosen because it is among “the nation’s most advanced school districts in recognizing the important of the regional superintendent position,” according to a statement released by the DeKalb school district that sourced the quote to the Wallace Foundation.