By DEVAN FILCHAK
The ratings for Southern Wells Community Schools and the bonds that are about to go to market for several projects from S&P Global have come back, and the company says the bonds look good.
Before revealing the ratings the district and the 2018 first-mortgage bonds themselves each received, Darnell told the board members at the Ju 18 meeting, “Gentlemen, this is huge.”
The long-term rating for the bond is an AA+. The underlying rating for the credit program, which essentially rates the district, is an A+.
“That puts us in the 85th percentile of all public schools in the state of Indiana. The next rating up is AA-, which includes Avon Community Schools and Carmel Community Schools,” he said. “Financially, that is where we are at in the State of Indiana, and that is huge.”
For the long-term bond rating, the Indiana state aid intercept structure was taken into account, which benefits all school corporations. Without certain state aid, the bonds may not be paid back on time, which is where the underlying A+ rating comes into play.
The A+ rating is based on the ad valorem property tax pledge, which is a tax levy that is not subject to annual appropriation under Indiana law. The lease requires the district to maintain at least two years of lease interruption insurance, which makes the bond safer, according to the report.
The S&P rating also reflects the school corporation’s own general creditworthiness, according to the report. As far as the corporation is concerned, the report said S&P’s opinion is that the corporation has its “own general creditworthiness, including its primary rural and stable economy that primarily center on agriculture, good-to-adequate incomes and extremely strong wealth, strong reserves — albeit on a cash basis of accounting, and low overall debt with limited capital needs.”
Darnell said aside from making the bond more attractive, the rating also speaks to the quality of the board.
“It speaks to the board’s conservative approach to finances,”
he said. “It speaks to the financial processing that has been done over time. That is just big.”
The report details how S&P could change the underlying A+ rating, whether it would lower the rating over the budgetary pressures resulting in structural imbalances that weaken cash reserves or raise the rating if the district is able to show a consistent track record of achieving balanced operations, strengthening its general cash fund reserves and if economic indicators improve significantly.
However, because of the A+ rating to begin with, S&P does not anticipate changing the rating during the two-year outlook horizon.