Birmingham Schools investment rating lowered
By Lisa Brody
Birmingham Public Schools has been notified by Moody's Investors Service that they have downgraded the district's general obligation unlimited tax rating from Aa1 to Aa2, school officials announced.
Moody's Investors Service, often referred to as Moody's, is a bond credit rating business providing international financial research on bonds issued by commercial and government entities. The company, founded in 1909, ranks the creditworthiness of borrowers using a standardized ratings scale, running from Aaa at the highest to C at the lowest, which measures expected investor loss in the event of default.
BPS said it was informed that Moody's changed rating methodology for schools, emphasizing financial performance, fund balance, enrollment and overlapping debt levels. Moody's is in the process of reviewing over 600 districts nationwide based on its updated rating methodology.
“The district’s general obligation unlimited tax rating has been downgraded from Aa1 to Aa2, and reflects the district’s debt-like obligations without consideration of any pledge, security or structural features. The Aa2 issuer rating does reflect our affluent service area. A factor in this change included the moderately decreasing student enrollment, average fund balance, outstanding debt and unfunded retiree benefit liabilities,” reported district spokesperson Brielle Blackwell.
She said moving forward, the district will continue to focus on increasing enrollment, reducing deficits and building upon programming that increases revenue to improve the fund balance.
“BPS has spent the last two years addressing budget concerns and eliminated $3.5 million from the annual budget in 2018-19, and was on a path to continue these budget reductions in 2019-20 prior to the pandemic,” Blackwell said. “COVID mitigation measures that increased spending were the focus this fall and have begun to level out as we head into the end of the 2020-21 school year. Additionally, revenue-generating programming was halted during the pandemic in many areas and is now beginning to ramp up once more, with anticipated growth as we move into a more stable environment this fall.”
Anne Cron, Birmingham Public Schools Director of Communications, said the new rating should not impact the district's first sale of bonds, which took place last summer. They were for $52.13 million worth of school building and site and refunding bonds, the first in a series of bonds following the March 10, 2020, approval of $195 million bond proposal to address facility needs and funding enhancements through 2026.