Kent School District’s credit rating outlook improves

Moody’s issues financial profile report

  • Friday, November 15, 2019 10:59am
  • News

Moody’s Investor Services affirmed the Kent School District’s A1 underlying rating on the district’s $225.7 million in outstanding unlimited tax general obligation bonds and the outlook on the underlying ratings has been revised to positive from negative.

The Moody’s report last week noted that the upgrade reflects positive fiscal results in 2019 showing a massive improvement in the district’s financial profile resulting in fund balance and liquidity levels that are in line with better performing peers in the state, according to a school district news release.

Moody also noted “the improved financial standing of the district is the result of a strong financial management team that has made staffing adjustments, better utilized existing financial resources, and capitalized on adjustments in the state funding formula. The rating also takes into consideration the district’s substantial and growing tax base in the Seattle metro area, as well as slightly above-average socioeconomic measures. Debt and pension liabilities are moderate and supportive of the rating.”

Moody’s ratings range from a best of Aaa to a worst of C. A1 means upper-medium grade and are subject to low credit risk.

“Over the last few years our district has been steadily working to ensure our schools across the district are equipped with the resources they need to be successful while maintaining fiscal solvency,” said Superintendent Calvin J. Watts. “This unprecedented validation from Moody further supports our fiscal management approach and reaffirms our significant and necessary shifts in practice. As a result, our students, families and educators will be able to rely on sustainable investments with greater certainty. From the classroom to the boardroom, we must continue working together to ensure that all students, regardless of where they live, their race, their home language or family income, have access to a high-quality education today and into the future.”

The Moody’s Credit Report specifically noted, “The revision of the outlook from negative to positive on the district’s underlying ratings reflects our expectations that management has made sustainable adjustments to the district’s financial operations that will allow it to maintain healthier reserve and liquidity levels that are in line with peers in the state. Like many districts throughout the state, salary pressures are likely to be a source of future financial challenges. However, the district’s recent financial stress and subsequent layoffs will likely limit bargaining groups from seeking concessions that would detrimentally impact the district’s overall financial health.”

While continued improvement in cash flow could result in future upgrades, the report did warn of factors that could lead to a downgrade, including “structurally imbalanced operations, material increase in the district’s debt burden, and sharp or protracted decline in the district’s tax base.”

Levy on Feb. 11 ballot

On the heels of the Moody Report, Kent School District received news from the King County Assessor’s Office that property values in the district are also on the rise for the sixth consecutive year. This news had an immediate positive impact on the replacement Educational Programs and Operations (EP&O) levy to be placed on the Feb. 11 ballot approved by the KSD board of directors last month.

Each year, King County accredited appraisers assess properties at its full market value using one or all of three approaches: Market (comparable sales), cost (reproduction or replacement cost, less depreciation) or income (income or capitalization of economic rents). Then an Official Property Value Notice is mailed to the property owner. The Official Property Value Notice shows both the previous and the new values.

The amount you pay for property taxes depends on the cost of state and local government, including schools, roads, parks, libraries, hospitals, city, and county government, as well as your local taxing districts such as port district, fire districts and sewer districts.

“In the months of planning for the February 2020 Educational Operations and Programs Levy, we studied the historical property values in our district, and we took a measured approach,” said Benjamin Rarick, district executive director of Budget and Finance. “The replacement levy is raising a specific amount of money, the increase in property values produces a lower tax rate. We are pleased we can adjust our ask of voters on the special election now, before the ballots go out in February to give our voters the most accurate information available to us.”

The final rate for 2020 property will be set by King County and may be done so after KSD files for the February Special Election. You can learn more about property taxes, and find information about property tax exemptions, on the King County Assessor website.

Visit the levy section of the district’s website for more details about the replacement Educational Programs and Operations (EP&O) levy to be placed on the Feb. 11 ballot.

Editor’s note: The description of an A1 rating has been corrected.

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