California School Bond Credit Ratings
/
When California K-14 issuers decide to issue new debt such as general obligation bonds or certificates of participation, part of the process likely involves seeking a credit rating for such financing. The three major credit rating agencies are: Moody’s, Standard & Poor’s (“S&P”) and Fitch. To the right are the available school district credit ratings from each of the major credit rating agencies for long-term debt. Most California K-14 issuers have prime, high grade or upper medium grade ratings. Credit ratings are one of the major factors that have an effect on an issuer’s overall borrowing cost for its financing.
Districts typically elect to receive one or two ratings based on the size of the financing to be issued. However, if a financing is sold privately or if it would otherwise receive a lower medium grade rating or speculative rating, the purchase of a credit rating may not be recommended by a district’s financing team.
The rating criteria for K-14 issuers are generally:
Local economy/tax base
District finances
District debt/pension
District management
The rating analysts typically review current and historical budgets, audited financials, financial reserve levels, enrollment history and projections, retirement costs, assessed valuation data, population statistics, economic growth within district boundaries, and various management practices. Districts may discuss this information with rating agencies though an in-person presentation or through a conference call.
In addition to speaking with credit rating agencies prior to the issuance of debt, districts may be subject to ongoing surveillance from credit rating agencies. Generally surveillance activities are completed by rating agencies if they have not spoken with a district for a couple of years. Credit rating agencies will typically request financial documents and may request a conference call if they have additional questions.