Bond Ratings: Less is More
You’ve likely seen those commercials where mysterious numbers between 600 and 800 fly overhead as individuals muse about their financial future. These SAT-look-alike scores are credit ratings, one metric of an individual’s financial outlook. Similarly, corporations, governments, municipalities, and school districts also have credit ratings; these are called Bond Ratings.
As a part of the Pittsford Schools’ nearly completed $43 million Capital Project, PCSD recently went to bid to issue Bond Anticipation Notes. These BANs will provide temporary funding for the District’s Capital Project until it issues long-term Bonds upon completion of the project. In personal terms, BANs are like a Line of Credit during a home construction phase, and the Bonds are like the mortgage upon closing and taking possession. Because of the strength of its financial position, PCSD obtained a lower than anticipated interest rate on the BANs when the District found itself in the center of a bidding war by investors! What makes Pittsford Schools so attractive to lenders? The District has earned a great Bond Rating based on its sound financial planning and solid reserves, with reasonable year-end surpluses to maintain its financial health. Our strong financial position and liquidity from utilization of the Capital Reserve, affords us the reputation in the construction community of “timely payers”. This often results in an aggressive bidding environment among quality contractors, reducing costs and enhance quality and quantity of work.
The District’s sound financial and project planning throughout the 2012 Capital Project will now result in a lower interest payment than anticipated. PCSD has captured those savings and is returning those funds immediately back into the schools by enhancing the intended renovations to the Sutherland High School pool/natatorium space—transitioning the shuttered, non-repairable pool area into a vital multi-purpose physical education/athletic space that will provide greater educational use for the dollar and be less annual cost to operate and maintain.
So LESS really is MORE. PCSD’s strong credit rating has driven less interest payment allowing it to produce more and better from the capital project authorized by the voters. Through the District’s ability to plan well, implement “seamlessly,” and demonstrate value, PCSD is winding down the Capital Project under budget, on time, and with enhanced scope for lower long-term cost and reduced future capital needs. Something to be proud of!