The service assigned an A1 rating to $268.7 million in Certificates of Participation (COPs), Series 2015A. That’s the same rating as the rest of the school’s $1.6 billion in outstanding COPs hold.
And its the same rating that recent Miami-Dade School Board COPs have been given by Moody’s. The Wall Street rating service congratulated Miami-Dade for its “strong management team,” an observation that was not made when analyzing Broward’s debt.
COPs have been used by Broward (and other governments across the country) largely because they don’t require approval of the voters. COPs don’t need a referendum because they require a School Board to vote to repay them every year from the existing revenue streams.
The recent $800 million in bonds added to the revenue by increasing the millage. That’s why those bonds needed voters approval.
The COPs rating announced last week is worse by one grade than the Aa3 rating on the district.
Aa3 is the lowest of the high-grade ratings. A1 is the highest of the upper medium grade.
Moody’s says the school system’s “stable outlooks reflect the slowly improving economy, expected financial improvement, and the sizable and diverse tax base.” It applauded the recent passage of the $800 million bond issue as “a positive credit factor given the district’s sizable short and long term critical capital needs.”
Now the not so good news:
The system “challenges” over its “ability to maintain an adequate level of reserves as budget pressures,” which persist and its continued “sizable capital needs.” Moody’s warns the rating would go down if there is “further financial deterioration” and continued “inability to adequately fund capital needs.”
Broward’s rating would improve if it had an “improvement in district cash and reserves” and “long-term capital funding sources and adequate funding of capital needs,” according to the rating service.
The take away: Moody’s believes Broward taxpayers need more debt to repair and replace deteriorating schools.
That’s no surprise.
Superintendent Robert Runcie has warned repeatedly that the $800 million in new bonds would only cover about one-third of the needed modernization.