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

Bonds Capital Improvement Plan Capital Improvement Programs CIP Planning Schedule Technology

The Importance of Completing Projects on Time and Budget in a Rising Interest Rate Environment

Navigating the Challenges of Completing Projects on Time and Budget in a Rising Interest Rate Environment Completing projects on time...
Read More
Capital Improvement Plan Capital Improvement Programs CIP Planning Technology

2024 Update: Impact of Travis County’s Public Improvement District Policy

Travis County's Public Improvement District Policy Update The 2024 update on Travis County's Public Improvement District Policy has brought about...
Read More
Capital Improvement Plan Capital Improvement Programs CIP Planning Process Improvement Technology

Revolutionizing Capital Improvement: The Impact of Artificial Intelligence

The Role of Artificial Intelligence in Transforming Capital Improvement Bond Programs Artificial intelligence (AI) is revolutionizing capital improvement bond programs...
Read More
Capital Improvement Plan Capital Improvement Programs CIP Planning

Get It Right from the Start or Pay the Price: The Urgent Need for Reform in Capital Improvement Bond Programs

The Importance of Starting Correctly on Capital Improvement Bond Programs Starting correctly on capital improvement bond programs is crucial for...
Read More
Capital Improvement Plan Capital Improvement Programs CIP Planning Process Improvement

Book Review: How Big Things Get Done: The Surprising Factors That Determine the Fate of Every Project

How Big Things Get Done: Unveiling the Secrets of Successful Megaprojects “a whopping 91.5% of projects overshoot budgets or timelines,...
Read More
Capital Improvement Plan Capital Improvement Programs CIP Planning Process Improvement

Read or Risk Ruin: 10 Must-Have Books on Capital Improvement Bonds for Taxpayers and Decision-Makers

Essential Reading for Capital Improvement Bond Program Managers Leading a capital improvement bond program intertwines expertise from public finance to...
Read More
Capital Improvement Plan Capital Improvement Programs CIP Local Planning

Time for a Change in Mindset: Why the Construction Industry Must Mature

In an era where innovation and efficiency are the benchmarks of success, it's baffling that the construction industry still operates...
Read More
Capital Improvement Plan Capital Improvement Programs CIP Local Planning

Avoid These 7 Deadly Sins of Capital Improvement Program Management

Introduction Program managers, project managers, and construction professionals play a crucial role in capital improvement program management. To ensure successful...
Read More
Capital Improvement Plan Capital Improvement Programs CIP Local Planning

Revolutionize Your Capital Project: Control Duration and Costs with Optimization

Navigating the intricate pathways of capital projects is a monumental task, often marked by a relentless race against time. These...
Read More
1 2 3 15