What is a credit rating?
A credit rating is an independent and forward-looking opinion about the ability of an party to meet its financial obligations in full and ontime. Credit ratings provide transparency for our district on our credit worthiness and insight to make more informed decisions on our financial infrastructure.
What rating did Rochester Public Schools receive?
Rochester Public Schools recently received a AA rating from S+P Global Ratings, which puts our credit rating among the top of Minnesota Public School Districts. Only three districts in the state rank higher than RPS.
S+P found our management team to be forward-looking and scored well on their financial management assessment with an extremely strong tax base and overall low debt service.
Here are some highlights from the report:
- The board has debt and investment management policies, and also provides an investment holdings and earnings report to the board monthly. The district has a formal policy of keeping an unassigned general fund balance of at least 6% of expenditures, which it has historically achieved.
- Following four years of use of general fund reserves, to align the fund balance with the 6% policy, the fiscal 2018 and 2019 audits ended with surpluses. With the construction of the new facilities, management would like a larger cushion of reserves to help with cash flow as expenses grow along with its facilities' footprint.
- The school district uses enrollment counts and four years of historical trend analysis to develop budget assumptions and follows a formal budgeting process that includes board-approved budget adjustments twice a year. It produces a five-year financial forecast and a 10-year capital plan that includes funding sources, both of which are updated annually and available publicly. Officials have a facilities task force to make recommendations to the board about the current facility expansion. The district is also taking measures to ensure strong cybersecurity practices.
- With the issuance of the bonds, its outstanding debt is more than doubling and amortization is moving to a more average pace at 49% in the next 10 years. In our view, the district's overall debt burden is moderate at $3,196 per capita, but debt service is low at 2.6% of market value. The district plans to issue $40 million of additional bonds in 2020, which we believe will not materially change its debt profile. It has no private placement or direct purchase debt obligations.