The DeKalb County School District wasn’t exactly blindsided by news last month that Moody’s Investors Service placed the school district on review.
District officials were nearly a year late submitting financial documents for an annual audit, and parents began raising concerns in 2019 after a group realized the district missed the Dec. 31, 2018 deadline for submitting financial information to the state for its annual audit.
The financial documentation helps credit-rating agencies such as Moody’s determine how much risk should be associated with lending money to organizations. That risk is memorialized in the form of a bond rating, which impacts the interest rate paid when issuing debt on things such as construction projects.
School district officials have said they will not meet the 30-day deadline Moody’s gave for receipt of the financial documentation. Missing it will leave the rating agency with a decision: Moody’s could leave the district’s credit rating as-is, or remove it altogether.
Removal of the district’s bond rating could mean taxpayers pay more interest on debt, like the idea floated by district officials to cover about $265 million in construction cost overruns related to projects in its Education-Special Purpose Local Option Sales Tax V program.
“If you don’t have a rating, it restricts people who might be able to buy your bonds,” said Jim Spiotto, an expert in government finance and managing director of Chapman Strategic Advisors. “Bonds also specify the type of rating you have to have. When you’re restricted, it may very well increase the borrowing cost. Obviously, the full market is not participating (in the funding process).”
District officials sent audit information to state officials in late December 2019 for both the 2018 and 2019 audits. The process typically begins in February and takes several months to complete.
Spiotto said options include paying Moody’s for an expedited rating once the district’s financial audit documents are available to share.
District officials have said they’re not worried about the stripped rating, but want to have the matter addressed as soon as possible.
The plan to seek more money — potentially through a referendum for additional tax funds — for cost overruns was immediately met with opposition from residents and parent groups across the district. Many are worried about approving so much debt when financial documents are not available that would present the district’s financial picture.
They also say the timing is inappropriate because the district’s leadership is up in the air, with interim leaders in charge of many departments.
“To me, it’s like a ship without a captain, and no hands on deck,” parent Debbie Miller said last spring when the move was announced. “Now is not the time to be asking for this. You don’t have a leader.”
District officials said at the time that rebuilding some facilities that were not included in the 2016 capital project plan was an imperative.
“Many of the old, small elementary schools that are receiving some renovation money in E-SPLOST V would better serve the district by being totally rebuilt rather than replacing key systems,” according to a district statement released last year.
Interim Superintendent Ramona Tyson has said she is looking at alternatives, and recently announced redistricting plans that could help alleviate some overcrowding and avoid some construction projects.
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