Moody's downgrades Shakopee school district credit rating

Shakopee Valley News

Moody's downgraded Shakopee Public Schools' credit rating on Monday, citing the reduction in the district's fund balance and cash reserves in recent years.

The district grappled with a $4.5 million budget shortfall this year, which was reduced substantially after a series of budget cuts and moves, including the mistaken use of $2 million that had been set aside for the high school expansion.

Much like a person's credit score, a school district's credit rating determines how much interest it has to pay to borrow money and can affect insurance costs.

Moody's downgraded the district's rating from Aa3 to A2 on the district's $182 million of outstanding general obligation bonds and from A1 to A3 on its $11.5 million of outstanding certificates of participation.

According to the rating agency, the bond downgrade is a reflection of "the district's recurring operating deficits; narrowing of operating fund balances and cash levels; and an above average debt burden."

Moody's also gave a negative outlook, saying it expects "further declines in the district's already very narrow operating fund balance."

"We are disappointed, but not surprised by this downgrade," Interim Superintendent Gary Anger said in a press release issued in response to Valley News' inquiries. "This downgrade is directly related to the financial decisions made by the district's past leadership."

Moody's said Shakopee's rating could be upgraded if its operating reserves and liquidity grow materially, its tax base grows and expands and its debt burden moderates. But the district could see downgrades if there are more declines in operating reserves and liquidity or significant deterioration of the tax base, the rating agency said.

The scores are reviewed annually and the district will get an opportunity to upgrade the rating, but that could take time, school officials said.

"We expect that with new district leadership that in the next few years, we could receive an upgraded rating," Director of Finance and Operations Suzanne Johnson said in a prepared statement. "Over the next few months, we will be establishing goals to grow the fund balance. We are analyzing all costs and will present a five-year plan."

Deena Winter contributed to this report.