District Administration - April 2007 - (Page 50)

ADMINISTRATIVE SOFTWARE points equal one percentage point), making the rate 4.85 percent. It would save roughly $900,000 over the life of the bond. Many factors that bond rating ﬁ rms use to rate a district are essentially outside an administrator’s control: the diversity of the local tax base, the employment rate, median household income, enrollment patterns. However, district ofﬁcials do have power over other parts Moody’s highest rating. Gretchen Saunders, the district’s chief business ofﬁcer, gives most of the credit to the district’s ten-year campaign to build an embargoed contingency fund balance of $79 million. By saving a little each year, including large one-time payments such as from Pepsi for the right to sell soda at the schools, the district has created a rainy-day fund that can only be touched during an emergency “There are a lot of outside factors that are difﬁcult for us to control, but if we’re knowledgeable about it and show that we understand the total community, that matters.” —John Musso, executive director, Association of School Business Ofﬁcials International of Association of School Business Ofﬁcials International and a veteran of managing two dozen bond issues at the district level over the years. To lower its debt, a district can raise taxes, outsource work, ﬁre teachers, cut administration costs—anything that pares away at how much it owes. “Sometimes it’s as simple as having a board policy to do things right, or showing that you reacted in a timely manner to a budget issue,” Musso says. “Use multiyear ﬁnancial forecasting to show that you’re thinking clearly about the future.” The beneﬁts of something like multiyear ﬁnancials—which project the income and expenses of a district for several years to come—go beyond just getting a better bond rating. They can be a valuable tool to ensure the district is ﬁnancially sound. of the ratings formula and can even mitigate the impact of the demographic and economic factors. Get Fiscally Healthy Personal credit ratings are based on how much a person owes, how much that person earns and how he or she has treated creditors in the past. To a large degree, your district’s bond rating is no different. “You have to have sound ﬁ nancials,” Smith maintains. Pay down existing debt, he adds, such as any debt to vendors or if there is a gap between how much was brought in last year versus how much was spent. “Make sure there are no surprises—no unfunded liabilities like pension obligations that will come due during the life of the bond.” The School District of Hillsborough in South Florida recently raised its bond rating one level to Aa2, making it one of only two districts in the state to have or for unforeseen circumstances. There is no law preventing districts from using contingency funds for anything it wants, but that’s not ﬁ nancially sound. Not only did the ﬁ nancial stability impress Moody’s, but it also is comforting for a district to have a reserve. “We’re the largest employer in the county; a lot of people rely on us to be able to make payroll every month,” Saunders says. Put Your Problems in Context If your district is facing declining enrollment, if local residents generally don’t make much money or if voters have been unwilling to pay for schools, the rating agencies know it. Don’t try to hide your district’s weak points; get in front of them instead. “There are a lot of outside factors that are difﬁcult for us to control, but if we’re knowledgeable about it and show that we understand the total community, that matters,” Musso says. “If you identify that, yes, there’s a problem, but we have strategic steps to overcome it—that can be the difference between a full rating or a plus or a minus.” Be prepared to show the town’s economic development plan, for example, or describe in detail how a new housing development is going to impact enrollment. And no detail is too small, even for a district where things are going well or that is among the larger Plan Ahead Even if you can’t imagine having the resources to put millions away, your district can have a big impact on its bond rating through the budgeting and planning processes. Your team’s foresight, organization and level of responsibility are being judged, and policies that help reduce the likelihood of credit deterioration get high marks. “If you can make movement to deal with a problem like a high debt load, that’s so important,” says John Musso, the executive director 50 April 2007 District Administration

Table of Contents for the Digital Edition of District Administration - April 2007

Editor's Letter
Update
Inside the Law
Curriculum Update
District Profile
Administrator Profile
“See You in Court!"
Lost in Translation
Bonding Agents
Certifying AP Courses
Hunting for Talent - Part 2
Buying Power
The Musty Bookshelf
New Products
Leadership
Speaking Out
The Online Edge
Problem/Solution
Calendar of Events
Overheard On The Pulse

District Administration - April 2007