Moody’s Affirms Aa2 Rating for City School District of New Rochelle, Removes Negative Outlook

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Moody’s Affirms Aa2 Rating for City School District of New Rochelle, Removes Negative Outlook

June 15, 2016 - 13:14
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NEW YORK, NY -- Moody's Investors Service has affirmed the Aa2 rating on City School District of New Rochelle’s $53.6 million in outstanding general obligation debt in addition to removing its negative outlook. 

Moody's Report on City School District of New Rochelle

The Aa2 rating reflects the district's substantial tax base, above average socioeconomic indicators and reserve levels below what is typical for the rating category.

Moody’s cited the district’s sizable tax base, its conservative budgeting practices and large scale development with the potential to expand the tax base as its credit strengths.

“We are proud of our significantly positive financial improvement,” said District Superintendent Dr. Brian G. Osborne.  “This Moody’s rating is reflective of our joint efforts with the Board of Education to change the district’s approach to budgeting.  Assistant Superintendent Jeff White and his talented financial team have validated to Moody’s the district’s financial viability to the point that in addition to affirming our current rating, Moody’s has removed its negative outlook.”

In 2015, a new management team came in with a mandate to repair the district’s finances and infrastructure.

In its credit opinion, Moody’s wrote: “The superintendent and assistant superintendent for business and administration have demonstrated experience with rebuilding the finances of distressed districts.”

The report said in the fiscal 2016 school year, the first full fiscal year under new management, the district increased its expenditures by 1.9 percent and balanced the budget without the use of fund balance and a 1.99 percent tax levy increase. The district projects it will end the fiscal year with an operating surplus that will bring its unassigned fund balance to around four percent.

In addition, the Moody’s report noted the district's direct debt burden of 0.7 percent of full value will remain stable in the near term given planned future issuance timed to begin when debt service on outstanding bonds tapers off. Overall debt burden remains a manageable 1.9 percent when overlapping debt and state aid is taken into account. Amortization of principal is rapid, with 100 percent retired within 10 years, according to the report.

Also, debt service for the district comprised a manageable 3.9 percent of fiscal 2015 operating fund expenditures. Total fixed costs, including debt service, pensions and OPEB, accounts for approximately $36.3 million, or an average 15 percent of total operating fund expenditures, the report said.

The Moody’s report noted district voters recently approved a $106 million capital bond project to address urgent infrastructure needs. The bond is expected to go to market later this year. This will address the findings of the district's five year Building Condition Survey (BCS), which found all 10 of the district's buildings were rated unsatisfactory and in need of repair. The bond project will be supported by a state building aid ratio of 48.7 percent lessening the debt burden.

Moody’s also referenced the 2016- 2017 school budget, which includes a 1.4 percent increase in spending, balanced with a 1.1 percent levy increase, within the state cap. As in the fiscal 2016 school year, the district produced a balanced budget without appropriated fund balance and expects to end the year with additional reserves.

The report noted the district’s liquidity position provides a moderate degree of financial flexibility. Cash totaled $37 million, or 15.7 percent of revenues in the fiscal 2015 school year.

The report also noted that despite recent full value reductions due to a weak housing market and tax certiorari claims among top tax payers, the district's tax base is expected to stabilize over the near term due to its strategic location to Manhattan.

“The Moody’s report is a testament to our commitment to be respectful of the use of taxpayer dollars,” added Osborne. “We pledge to continue to be prudent in all our budget planning while providing the highest quality education to our students.”