Eureka School District 44-1, SD Debt Rating Lowered To #A-# From #AA-# On Application Of Outlook Negative

Stocks and Financial Services Press Releases Thursday March 8, 2018 11:39
CENTENNIAL--8 Mar--S&P Global Ratings

CENTENNIAL (S&P Global Ratings) March 7, 2018--S&P Global Ratings lowered its rating to 'A-' from 'AA-' on Eureka School District 44-1, S.D.'s limited-tax capital outlay certificates, based on the application of its Issue Credit Ratings Linked to U.S. Public Finance Obligors' Creditworthiness criteria, published Jan. 22, 2018, on RatingsDirect. The outlook is negative.

We had previously rated the certificates under our "Special Tax Bonds" criteria, which the "Ratings Linked" criteria has fully superseded.

"The negative outlook reflects our view of the district's weak recent operational performance and consecutive years of deficit spending that led to a substantial decline in general fund reserves," said S&P Global Ratings credit analyst Kaila Spalinger. "In addition, the negative outlook reflects our expectation of increasing fixed costs related to salaries and benefits, resulting in budgetary pressure going forward."

Additional weaknesses include our view of the district's:
  • Merely adequate income indicators,
  • Nominally low reserve levels, and
  • Moderate per capita overall net debt burden and carrying charges.
Offsetting the above weaknesses is our view of the district's:
  • Extremely strong market value per capita levels resulting from highly valued farmland, and
  • Stable to growing enrollment, which drives revenues under the state funding formula.

We could lower the rating if the district's reserves decline to levels no longer consistent with those of similarly rated peers, or if we otherwise believe that the symptoms of structural imbalance apparent in its operating budget are inadequately addressed, increasing the likelihood of ongoing pressure on reserves and liquidity through the medium term. The negative outlook therefore reflects that there is at least a one-in-three chance that we could lower the ratings in our one-year outlook horizon. However, we could revise the outlook to stable in the near term if budgetary performance stabilizes and the district maintains strong reserve levels.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.


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