Ever wonder how Wall Street looks at Bryan County Schools?
The district’s recent issue of $18.9 million in 2021 bonds for school construction was given a AA+/stable rating by S& P Global Rating, while Moody’s rated the district’s recent bond sale as Aa2.
The ratings, while not the highest assigned by either firm – that would be Aaa from Moody’s and AAA from S& P -- are the highest a district of Bryan County Schools can be given, officials say.
Why is it important?
Much like an individual’s credit score helps one get better rates on loans, higher ratings generally allow a school district to save money because it means investors who buy into the general obligation bonds are more likely to be see a return on their money.
So, while an AAA rating means the issuer of the bonds has an extremely strong capacity to meet its financial commitments. The AA+ or Aa2 rating means the bond issuer – in this case Bryan County Schools – has a “very strong capacity” to pay its bills, according to such firms, and investors like that.
Bryan County Schools Assistant Superintendent for Business and Finance Melanie James announced the rating at the school board’s March 25 meeting.
In an emailed statement, she said the rating ultimately saves the district, and taxpayers, money.
“The AA ratings from Moody’s and S& P respectively, place the School District in the second highest rating category and the highest rating that is issued for a district of our size. These strong credit ratings make the bonds very attractive to investors who are looking for safety and long-term value,” James said. “For the School District, it means lower interest rates and therefore hundreds of thousands of dollars less interest paid over the life of the issue.”
Beyond that, in a multiple-page summary of its rating, S& P provided an interesting take on Bryan County Schools financial health and how such a firm views the district and the county.
Here’s a look: - Proceeds for the $18.9 million 2021 series bonds will fund “various capital projects throughout the district, including the new Richmond Hill High School.” As part of approval of another Education Special Local Option Sales tax, or ESPLOST, in 2017, voters also approved the district’s sale of up to $100 million in bonds to fund school improvements and construction of a new RHHS, which officials first projected to cost upwards of $80 million. Voters in that referendum also approved the levy of another 1.5 mills on property owners to help cover that debt, a fact obviously not lost on S& P.- The district’s bonds are “secured by the district’s full faith and credit,” S& P noted, “including its ability to levy property taxes without limitation as to rate or amount.”
- Potential cuts to state funding for the 2021 fiscal year didn’t materialize, and government spending resulted in more than $6 million in state and federal funding from the CARES act, as well as more from the American Rescue Plan recently passed by Congress and signed by President Joe Biden. That plan authorizes Georgia school districts to get some $4.2 billion in funding, according to S& P.
- S& P notes that state aid is consistent and strongly supported from year to year. What’s more, the district has to authorize the state to step in and withhold funding from districts “for debt service when necessary.’ In short, if from some reason BCS couldn’t pay back investors, the state can withhold funding to pay them instead.
That’s hardly likely, because S& P notes the district’s “trend of operating surpluses and very strong fund balance, guided by prudent budgeting.”
At the same time, S& P reported the district’s rapid growth “could pressure district operations over medium to long term should development disproportionately match school access across the county.”
And while S& P considers the school system’s debt burden as manageable, “we view its pension and other postemployment benefit contributions as moderately high, totaling 10.1 percent of total governmental fund expenditures in fiscal 2020.”
The rating reflects S& P’s assessments in other areas as well, from economic expansion and participation in the Savannah metro area to “proven conservative budgeting with a demonstrated ability to weather economic downturns” and a “strong operating performance trend.”
Even climate change is factored in, with S& P stating the “district’s environmental risks are somewhat elevated relative to the sector, due to the district’s proximity to the coast; however, the district is mitigating sea-level rise risk through a partnership with the Georgia Institute of Technology, working on 15-, 20- and 40-year plans.”
The county’s 10 percent population growth is also considered a positive in terms of supporting economic growth and positive property tax trends.”
S& P even took a look at the school district’s debt in fiscal 2020 and found it was 1.6 percent in market value, which adds up to $1,922 per person in the county, “both of which we view as low,” S& P analysts reported. That said the additional debt on the bonds will increase the district’s per-capita debt to $3,322, which S& P views as moderate.
The company also took into account the district will issue $18 million in bonds supported by a renewal of SPLOST, if it is renewed.
Other potential issues include the district’s pension plan contributions or an “abrupt funding change to state aid that the district does not absorb through revenue or expenditure modifications.”
The S& P report gives its opinion on the local economy, noting “median household effective buying income (EBI) is strong at 115 percent of the national level, but per capita EBI is good at 94 percent,” the report said, adding, “At $117,989 per capita, the 2020 market value totaling $4.6 billion is, in our opinion, extremely strong.”
The report also looks at the proximity of Fort Stewart, adding “many of the county residents are employed by the military as officers or higher-ranking officials,” and since 2018 the county’’s net tax digest has grown by 15.8 percent to $1.6 billion.
About 7.1 percent of the digest comes from the county’s 10 largest taxpayers, “representing a very diverse tax base, in our opinion.”
And if you’re looking at getting further detail, the report includes a portion on the district’s finances, a portion of which follows: “Consistent with its general operating performance trend over the last decade, the district reported a surplus operating result of 2.9% of expenditures in 2020. Likewise, the district has increased its reserve balance year over year, ending fiscal year-end (June 30) 2020 with an available fund balance of $20.6 million, which, at 22% of general fund expenditures, we view as very strong. Of this amount, $20 million is unassigned. The district’s fiscal 2021 budget is funded primarily by state funding (65%), followed by local sources, particularly property taxes (28%),” the report said.