Brownsburg Community Schools, IN Debt Rating Lowered To 'A+' On Reduced Budgetary Flexibility
CHICAGO (S&P Global Ratings) Oct. 24, 2017--S&P Global Ratings lowered its underlying rating to 'A+' from 'AA-' on Brownsburg Community School Corp., Ind.'s debt. At the same time, we assigned our 'AA+' enhanced long-term rating and 'A+' underlying rating to Brownsburg 1999 School Building Corp.'s series 2017 ad valorem property tax first-mortgage bonds issued for Brownsburg Community Schools. In addition, we affirmed our 'AA+' enhanced long-term rating on the district's debt outstanding. The outlook is stable for all ratings. "The downgrade is based on our view of the district's worsening debt burden, following the expected issuance of nearly $85 million in additional debt within the next year, coupled with high fixed costs, which we believe reduces the district's budgetary flexibility," said S&P Global Ratings credit analyst Benjamin Gallovic. The 'AA+' enhanced long-term rating reflects our view of the school district's participation in the Indiana State Aid Intercept program and our assessment of the strength of the state aid intercept structure, which is based on Section 20-48-1-11 of the Indiana Code. The series 2017 bonds are secured by lease rental payments paid directly to an independent trustee pursuant to a trust indenture between the school building corporation and trustee as well as a lease between the school district and the school building corporation. Rent is payable from ad valorem taxes against all taxable property within the district's boundaries, and rental payments are not subject to annual appropriation under Indiana law. Lease payments are subject to abatement if the leased property is damaged or destroyed, though lease provisions requiring the district to maintain rental value insurance sufficient to cover two years' rent and property or casualty insurance sufficient to cover the full replacement cost of the leased property mitigate abatement risk. Proceeds from the 2017 ad valorem property tax first-mortgage bonds will be used to finance renovations at the district's high school, construct a new elementary school, and repay a series of bond anticipation notes. The elementary school project is expected to be completed in June 2018, with the first interest payment occurring in July 2018. RELATED RESEARCH Alternative Financing: Disclosure Is Critical To Credit Analysis In Public Finance, Feb. 18, 2014
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| Primary Credit Analyst: | Benjamin D Gallovic, Chicago 312.233.7070; benjamin.gallovic@spglobal.com |
| Secondary Contact: | John Sauter, Chicago (1) 312-233-7027; john.sauter@spglobal.com |
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