The Gilroy Unified School District is back in good standing with
credit rating company Standard
&
amp; Poor’s.
The Gilroy Unified School District is back in good standing with credit rating company Standard & Poor’s.
After a short stint on “CreditWatch with negative implications” – a designation given when an entity’s rating could slide – the district has proven its ability to meet its financial obligations, according to Standard and Poor’s. The district’s general obligation bonds and certificates of participation were placed on CreditWatch with negative implications April 17 after the district failed to submit instructions to Santa Clara County to collect about $6 million in property taxes, which were needed to make a $5.4 million bond payment Sept. 1. The district has about half that amount in the appropriate fund.
When Standard & Poor’s placed the district on CreditWatch, it had not yet received written confirmation that the district would be able to cover the looming payment, said Standard & Poor’s Credit Analyst Le T. Quach. However, the district’s recent designation of $3.1 million in reserves in its capital fund and approval of a property tax advance from the county – two options the district could fall back on – gave Standard & Poor’s reason to remove the district’s debt from CreditWatch with negative implications and assign it a stable outlook.
“The ratings also reflect our view of the district’s diverse taxpayer base that has access to the broad Silicon Valley economy; very strong income levels; growing average daily attendance; and adequate historical general fund performance,” according to a press release issued by Standard & Poor’s.
“I’m ecstatic about being taken off CreditWatch,” Superintendent Deborah Flores said. “It affects our credit rating. I’m very pleased that after providing all the supporting documents, they saw we had the means to pay our debt.”
The district’s credit rating currently ranges from A to A+ depending on the particular series of bonds. An AAA rating is the highest rating assigned by Standard & Poor’s. An A rating is “somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories.” An A rating does, however, still indicate a strong capacity to meet financial commitments.
Come August, the district will decide which of its options – borrowing from the county or transferring funds internally to cover the debt – is the best option, Flores said.
The district will recoup the $6 million in Measure J property taxes by taxing residents at a higher rate in the remaining two years of the measure’s lifespan. Trustees voted to increase the Measure J tax – which voters approved in 1974 at a rate of $102 per $100,000 of assessed value – from its current rate of $70.50 per $100,000 to an amount not to exceed $105.70 per $100,000 in the next two years.
