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Posted August 23, 2013

APS Bond Rating Improves

Moody's Investor Service gives APS an improved credit rating which lowers the district's borrowing rate, putting more taxpayer-approved funding directly into projects.

Albuquerque Public Schools’ creditworthiness was changed from Aa1 with a negative outlook to Aa1 with a stable outlook, which means the district can borrow money for capital projects at a lower interest rate and put more money directly into schools and other projects. Aa bonds are considered high quality and subject to very low credit risk.

The rating was changed because APS has been able to build up its reserves and also has managed its debt efficiently, according to Moody's Investment Service, an international company that ranks the creditworthiness of borrowers using a standardized ratings scale.

APS’ rating was downgraded to a negative outlook a few years ago when it used money from its reserves – essentially the district's savings account – to cover costs of opening new schools as well as salary increases for employees. In addition, the reserves were twice tapped when federal stimulus money no longer helped cover cuts in state funding. The APS budget has been cut by more than $110 million in the past five years. The current operational budget is at the same level as it was during the 2009 school year.

While the APS Board of Education set a goal of keeping 5 percent of the district’s budget in reserves, the percentage has been as low as 2.3 percent in recent years. At that rate, APS didn't have enough money in its savings to cover payroll for a month.

Through conservative budgeting, strict expenditure controls and staff reduction through attrition (the district has cut 1,000 positions in five years), APS has reached its 5 percent goal, building back its reserves to about $36 million.

The Moody rating, along with a positive rating by Standard and Poor – another international credit rating company – impacts the rate at which APS can sell general obligation bonds, approved by voters for capital projects such as new and renovated schools and technology. The better the rating, the less interest the district has to pay, which means more money goes directly into projects.

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