School district's financial rating reflects tough economy

A recent financial rating gave the School Board of Highlands County a "good credit quality," which is one step above a "speculative' rating.

Fitch Ratings issued a report with a BBB-plus rating relating to about $1.5 million the district has borrowed against its share of state racetrack/pari-mutuel revenue.

A "BBB" rating indicates that expectations of credit risk are currently low, according to Fitch Ratings. The capacity of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity, Fitch noted.

The "BBB: Good Credit Quality" rating is a step above a "BB: Speculative" rating, which according to Fitch indicates an elevated vulnerability to credit risk.

Highlands District Superintendent of Business Operations Mike Averyt said "they did an update of our rating and they gave us the same rating we had when we got the original issue,"

Should the district have a better rating?

"It's what it was back when we did the original issue," Averyt reaffirmed. "We borrowed the money back in 1999; they did a refinancing and we borrowed additional money and we pledged the race track revenue that we receive about $300,000 a year and we pay that debt off with those funds."

The district has 10 more years to pay off the note, he said.

Does the rating have a negative impact on the district?

"What hurts the most was the Legislature when they took our millage away," Averyt said. The district won't have any funds available to borrow for awhile until the state reinstates the 2 mils it cut statewide from school districts and the county's assessed valuation goes up.

The district doesn't have a need at this time to borrow money because all the projects have been completed in its five-year work plan, he noted.

According to Fitch, the rating also includes the general credit characteristics of the district, including low debt levels with manageable capital needs and a limited economy with below average economic indicators.

Also, the rating reflects the district's recent financial volatility and decreased reserve levels, which remain consistent with the rating category.

The report noted that the district's state funding declined by $6.1 million in fiscal 2009 and the district chose to offset some of the cuts by using $2 million from its reserves.

The unreserved fund balance decreased to a "slim" 2.85 percent of spending, the report stated.

Headquartered in New York and London, Fitch Ratings is a global rating agency, which provides the world's credit markets with independent and prospective credit opinions, research and data.