Investors buying bonds such as the $63 million Manteca Unified is preparing to sell for improvements at 11 campuses rely on the advice of bond underwriters to determine the soundness of a school district.
Credit rating agencies are interested not in just the hard numbers in regards to revenue and whether school budgets are balanced and have adequate reserves, but also factors that aren’t reflected on a balance sheet.
The pitch that Manteca Unified crafted for presentations last month for the bond rating firm of Standard & Poor as well as Moody’s was aimed at retaining the district’s standing as a stellar credit risk.
When the last bond ratings were issued when Manteca Unified sold the initial offering of Measure G bonds in 2012, the S&P rating was “AA” while Moody’s gave the district an “AA2” rating. Both bond rating firms at the time said it was unusual for California school districts to have such a high rating outside of the Bay Area.
The higher the rating, the lower the interest rate charged. High ratings also make it easier to sell bonds.
Working in favor of Manteca Unified is a number of factors besides strictly dollars.
uSchool board stability. This doesn’t just mean board members with more than two decades of serving under their belts — Evelyn Moore and Nancy Teicheira. It also counts longevity in education and/or the community of which the entire seven member board can claim.
uDistrict administration stability. Rare are California districts where a superintendent sticks around for as long as five years. As of March, among the state’s 50 largest districts, Jason Messer has had the top job in Manteca Unified since 2008. That ties him for the third longest serving superintendent with the superintendent he replaced — Cathy Nichols-Washer — who started at Lodi Unified School District the same day Messer became acting superintendent in 2008. The only superintendents in the top 50 districts with longer tenure are Long Beach (2002) and Torrance (2005). But it’s not just the superintendent’s office that bond raters look for stability. It counts that Messer has been with the district since 2000 as has Deputy Superintendent Roger Goatcher. Chief Business officer Jacqui Breitenbucher has been with MUSD since 1993. The new kid on the block in terms of key district positions that credit rating firms look at is Deputy Superintendent Clark Burke who has been around since 2013.
Steady and stable growth. Too much growth is considered as challenging by bond raters as no growth or a decline in enrollment. Since 2011-2012 the district’s enrollment has increased 654 students to 23,957.
The ability to make progress in reaching educational goals. Two prime examples are increases in English learners’ proficiency and the high school graduation rate. Between 2013-2014 and 2016-2017 English learners’ proficiency has increased from 51.8 percent to 59.2 percent. Graduation rates from 2010-2011 to 2016-2017 have gone from 88.9 percent to 96.0 percent.
Growing economic job base. Manteca and Lathrop are enjoying robust housing growth. At the same time jobs are being added in a wide variety of fields from distribution to manufacturing with much of that growth in Lathrop and parts of Stockton around the airport that are within the district with Manteca starting to pick up speed. The fact Amazon and Tesla have operations within district boundaries as well as a healthy dose of top 100 Dow Jones companies bodes well for the district’s economic outlook
Labor stability. Not only is the turnover of teaching and campus administration staff low but the district has entered into multi-year contracts with teachers.
Regional positioning. The growing connectivity of the 113 square mile school district with the Bay Area not just through providing housing and a base for distribution but also through transportation initiatives such as Altamont Corridor Express commuter rail puts the district more and more in the orbit of the Bay Area as well as the Northern San Joaquin Valley.
Board adopted reserve policies. The school board requires a general fund ending balance of 3 percent in reserves for economic uncertainties. They also require a cash reserve of 75 percent of one-month cash flow expenditures that translates into 6.25 percent of the general fund budget.
The bond proceeds of $63 million will be spent on the second phase of Measure G projects that includes Calla High, East Union High, French Camp School, McParland School, Lathrop High, Manteca Day School, Manteca high, Neil Hafley School, New Haven School, Nile Garden School, and Weston Ranch High. That will leave $36 million in unused Measure G bonds expected to be issued in 2020.
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