Potterville Public Schools, MI Series 2022 School Building And Site Bonds Rated ‘A’; Outlook Is Stable
CENTENNIAL (S&P Global Ratings) Feb. 9, 2022--S&P Global Ratings assigned its 'AA' long-term rating and 'A' underlying rating to Potterville Public Schools, Mich.'s 2022 school building and site bonds, with a preliminary par amount of $5 million. The outlook is stable.
The 2022 bonds are secured by the district's full faith and credit, including its ability to levy ad valorem property taxes without limitation as to rate or amount, as approved by voters on Aug. 3, 2021. The bond proceeds will finance a new early childhood center and HVAC upgrades.
The 'AA' long-term rating reflects our view of the district's participation in the Michigan State School Bond Loan Program. Section 16 of Article 9 of Michigan's 1963 Constitution created the program to provide districts access to funds to meet debt service payments on qualified debt. Under the program, if a school district's property tax levy is insufficient to make debt service obligations on qualified debt, it can borrow from the state's school loan revolving fund to make up the difference. If the balance in the fund is insufficient to cover the obligation, the state is required to make loans from its general fund or issue general obligation (GO) debt to make funds available. In addition, the state treasurer can pay required debt service if a paying agent for qualified bonds gives notice of a deficiency. We rate bonds in this program on par with the state GO rating, and the rating on the bonds moves in tandem with the state GO rating and outlook.
"The district's underlying rating is supported by our view of its improving financial position, with reserves growing to 8.6% of expenditures in fiscal 2021, which is likely to be sustained in the near term given a supportive state aid environment and federal stimulus funds," said S&P Global Ratings credit analyst Randy Layman. "The rating also reflects our view that the district's economic metrics are in line with national averages and employment access throughout the Lansing metropolitan area. The rating is limited by additional debt plans and ongoing pension-related pressures."
If the district cannot maintain structural balance leading to sustained declines in reserve and liquidity balances we could consider a lower rating.
Considering material debt plans, a higher rating is unlikely over at least the two-year outlook horizon. However, we could consider raising the rating if the district's enrollment trends, economic metrics, and available reserves improve.
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| Primary Credit Analyst: | Randy T Layman, Centennial + 1 (303) 721 4109; randy.layman@spglobal.com |
| Secondary Contact: | Michael J Mooney, New York + 1 (212) 438 4943; michael.mooney1@spglobal.com |
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