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Moody's Investors Service Inc.

Moody's Assigns A1 Underlying and Aa1 Enhanced Ratings to Clarkston Community Schools' Bonds

Strategic Insights

— 2 min read

The Moody's Investors Service has assigned a A1 underlying and Aa1 enhanced ratings to Clarkston Community Schools, MI's 2025 School Building and Site Bonds, Series II (General Obligation - Unlimited Tax) with a proposed par amount of $122.7 million. The district will have about $300 million of GO bonds outstanding after the current issuance. The A1 issuer rating reflects the district's strong local economy, improved reserve position, and conservative budget assumptions.

Key Takeaways:

  • The district's strong local economy and improved reserve position are reflected in its A1 issuer rating, with a 150% resident income ratio and nearly $183,000 full value per capita, both above the median for the rating category.
  • The district's fund balance will likely decline to around 19% in fiscal 2025 due to a $1.3M deficit driven by the loss of federal pandemic aid, but is budgeting a $4 million draw in fund balance in fiscal 2026.
  • The district's enrollment trend ratio is negative 4.1%, but the decline is largely caused by the closure of the district's virtual academy, and has a shared services agreement that increases the number of FTE students for state aid revenue.
  • The A1 GOULT rating is the same as the issuer rating, based on the district's authority to levy an ad valorem property tax, unlimited in both rate and amount, to pay debt service on the bonds.
  • The Aa1 enhanced rating reflects the additional security provided by the Michigan School Bond Qualification and Loan Program (SBQLP), which has a constitutional obligation to provide a qualified school district with sufficient funds to make timely debt service payments, if necessary.
  • The stable outlook reflects the expectation that district finances will remain healthy above 10% over the next 18 months and that the three-year enrollment CAGR will level out.

Statistics:

  • $122.7 million: Proposed par amount of the bonds.
  • $300 million: Total GO bonds outstanding after the current issuance.
  • 150%: Resident income ratio, above the median for the rating category.
  • $183,000: Full value per capita, above the median for the rating category.
  • 19%: Fund balance in fiscal 2025.
  • $1.3 million: Deficit driven by the loss of federal pandemic aid.
  • 4.1%: Three-year enrollment trend ratio.
  • 58 square miles: Area covered by the district.
  • 6,700 students: Total student enrollment.
  • 2,000: Number of FTE students attending non-public schools through shared services programming.
  • 343%: Long-term liabilities ratio after the current issuance.
  • 30%: Fixed costs ratio after the current issuance.

Sources:

  • Moody's Investors Service
  • US K-12 Public School Districts methodology (July 2024) - https://ratings.moodys.com/rmc-documents/425431
  • Guarantees, Letters of Credit and Other Forms of Credit Substitution Methodology (July 2022) - https://ratings.moodys.com/rmc-documents/386295

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