Saline schools' bond rating downgraded due to deficits, low cash reserves
Moody's Investor Service has downgraded Saline Area Schools' bond rating, according to a report in the Saline Post.
According to a report on Moody's website, the district was downgraded due to its multi-year trend of operating deficits that resulted in decreased general fund reserves or fund balance, the school district's primary savings account.
Saline Area Schools passed a $52 million operating budget for the 2013-14 academic year that restored $97,215 to the district's fund balance, bringing the total account back up to $2.59 million, about 5.13 percent of Saline's general fund.
Moody's summarized Saline schools' bond ratings strengths as: a large tax base located near Ann Arbor (which is rated Aa1), an affluent demographic profile and recently enacted expenditure reductions expected to improve financial operations.
The Moody's report highlights that a significant increase in fund equity or a reduction in the district's debt burden could move the bond rating up. The effect of a lower bond rating is higher interest rates when borrowing money and a greater difficulty in being approved for loans or lines of credit.
Contraction of the tax base, erosion of the demographic profile or further spending of the district's fund equity could move the rating down, according to the report.