Saginaw City School District, MI Bond Rating Raised To #BBB+# On Positive Fund Balance

Stocks and Financial Services Press Releases Thursday February 25, 2016 08:48
NEW YORK--25 Feb--Standard & Poor's

NEW YORK (Standard & Poor's) Feb. 24, 2016--Standard & Poor's Rating Services raised its underlying rating for credit program to 'BBB+' from 'BBB' on SaginawCity School District, Mich.'s existing general obligation (GO) debt. The outlook is positive.

At the same time, Standard & Poor's assigned its 'AA-' long-term rating and its 'BBB+' underlying rating for credit program to Saginaw City School District, Mich.'s series 2016 unlimited-tax general obligation (GO) refunding bonds. The outlook on both ratings is positive.

"The upgrade reflects the district's return to a positive fund balance for the year end June 30, 2015, after posting a surplus of $7.2 million which returned the district's available reserves to 4.8% of operating expenses," said Standard & Poor's credit analyst Errol Arne.

The long-term rating reflects the district's participation in the Michigan School Bond Qualification and Loan Program, which has a credit profile of 'AA-.' The program provides school bonds with added security from a state aid withholding mechanism that has statutory provisions we consider strong. Upon state approval, the agreement between the state and local school district for program participation is irrevocable as long as any program debt is outstanding. The rating on obligations that have received enhancement under the program is on par, and moves in tandem with the rating on the state.

The underlying rating reflects our view of a pledge of the district's full faith credit and resources and an agreement to levy ad valorem property taxes without limit to rate or amount secures the bonds. It is our understanding that bond proceeds will be used to refund the series 2006 refunding bonds for interest cost savings only.

The positive outlook on the long-term rating reflects Standard & Poor's opinion of the state's GO bond rating outlook.

The positive outlook on the underlying rating reflects our opinion that there is a one-in-three chance that we could raise the rating within our two-year outlook horizon. If the district is able to attain an audited surplus in fiscal 2016 and adopts a balanced budget for fiscal 2017, the rating will likely be raised. However, if the district posts a deficit for 2016 or adopts a budgeted deficit for fiscal 2017, we would most likely revise the outlook to stable.

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