Share to:

The Factors Impacting Your School District’s Credit Rating

A high credit rating can save taxpayers money when building new schools and funding large facility maintenance projects. Rating agencies assess a district’s creditworthiness based on revenue sources, expenditure levels, debt service coverage, overall debt burden, ability to repay debts, local economic conditions, and financial management practices. By understanding the impact of these factors on a district’s credit rating, school districts can take proactive steps to maintain a strong credit rating and ensure that taxpayers are paying less for their schools and maintenance projects.

Financial Stability

The district’s financial stability is evaluated based on its revenue sources, expenditure levels, and debt service coverage. School districts with a healthy financial reserve, 15 – 20% of the operating budget, on average received a rating one notch higher than those that have a history of dipping into their reserves to cover operating expenses.

Debt Levels

Rating agencies consider the district’s overall debt burden, including the amount and type of debt, as well as the district’s ability to repay its debts on time. Ratings agencies on average rate districts with debt exceeding 10% of its total assessed property value one notch lower than those with debt levels below this threshold. 

It is important to note that there are two variables to consider here, debt amount and property value. If school districts do not issue bonds to pay for needed maintenance, the property value of the school will fall, so it is just as important to think about what impacts the value of our school properties.

Economic Conditions

Rating agencies evaluate the district’s ability to maintain its financial stability in light of broader economic conditions. A strong local economy can positively impact a school district’s credit rating, as it can increase the district’s tax base and reduce the risk of revenue volatility. School districts located in areas with strong economic growth had an average credit rating one notch higher than those located in areas with weak economic growth.

Management Practices

The agency considers the district’s financial management practices, including its budgeting, accounting, and debt management practices.Effective and transparent financial management practices can positively impact a school district’s credit rating, as they demonstrate a commitment to good governance and financial stability. School districts with strong financial management practices received an average credit rating one notch higher than those with poor financial management practices.

It is important for school districts to maintain strong financial management practices and to work to maintain a strong credit rating, so taxpayers are paying less for their new school and maintenance projects.

At Front Line Advisory Group, we provide program management consulting services for capital improvement bonds. We are revolutionizing the construction industry and transforming client expectations by obsessing over the basics of budget oversight, schedule enforcement, compliance, vendor management, and stakeholder communication. Contact us for more info at info@frontlineadvisorygroup.com.

FLAG provides program management consulting services in Central Texas for municipal and school capital improvement bonds. FLAG is revolutionizing the construction industry and transforming client expectations by obsessing over the basics of budget oversight, schedule enforcement, compliance, vendor management, and stakeholder communication.

Join our weekly newsletter and receive a free copy of our new book!

JOIN NEWSLETTER

Articles

Montgomery County’s 2025 Capital Improvement Bond: Commissioners Debate Roadmap and Timing

At Front Line Advisory Group, we believe that getting ahead of all aspects of a bond program is critical to...
Read More
Articles

Meeting the Infrastructure Challenge in Rapidly Growing Texas Cities

Mary Scott Nabers, owner of Strategic Partnerships, Inc. (SPI), is an accomplished expert in research, competitive analysis, and political advocacy...
Read More
Articles

Winning the Race Against Time: Strategies to Accelerate Capital Improvement Projects

In the world of capital improvement projects (CIPs), time is often the most unforgiving variable. Delays can increase costs, jeopardize...
Read More
Articles

Hope in Action: Launching a CIP Bond to Shape Our Local Future

Our local government stands at a pivotal moment. With aging infrastructure and a growing population, the need for substantial improvements...
Read More
Articles

Accelerating Design and Construction Operations in Municipal CIP Bond Programs Post-Election

A successful bond election marks a pivotal moment for municipalities, signaling public support for capital improvement projects (CIP) that promise...
Read More
Articles

How to Expedite Design and Construction Operations in Municipal CIP Bond Programs Post-Election

The time between election day and breaking ground on projects can significantly impact public perception and program outcomes.
Read More
Articles

Public-Private Partnerships: A Framework for Modern Infrastructure

As cities and municipalities face growing infrastructure needs, Public-Private Partnerships (P3s) have emerged as a powerful tool to bridge funding...
Read More
Articles

Borrowed Prosperity: Building or Binding Our Cities?

When municipalities envision growth and improved quality of life for their communities, Capital Improvement Programs (CIP) often become the blueprint...
Read More
Articles

Debt by Design: Bonds Engineering Our Urban Landscapes

Urban landscapes across the nation are undergoing transformative changes, and behind much of this evolution lies a powerful financial tool:...
Read More
Articles

Silent Sculptors: Bonds Shaping Cities

When you stroll through a city's lively streets, marvel at its architectural wonders, or enjoy a sunny afternoon in a...
Read More
1 2 3 20