S&P Global Ratings revised its outlook to stable from negative on Minisink Valley’s general obligation (GO) debt rating and reaffirmed its “AA” long-term GO rating on the district’s debt.
S&P Global Ratings is an American credit rating agency and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is considered the largest of the Big Three credit-rating agencies, which also include Moody’s Investors Service and Fitch Ratings.
GO debt is secured by the full faith and credit of the local government or school district. issuing the debt. Those entities pledge their tax revenues unconditionally to pay the interest and principal on the debt as it matures.
“AA” is considered to be a high grade for a bond and means that there is a “low” chance of a default. Organizations with AA-rated bonds are in good financial shape, but there is still some room for improvement in the eyes of the credit rating agencies.
“The outlook revision to stable reflects the district’s stabilized reserve position, which we consider very strong,” said S&P Global Ratings credit analyst Felix Winnekens.
“This is welcome news, due to the hard, steadfast work of Assistant Superintendent for Business Patrick Witherow and his talented finance team,” said Superintendent Brian Monahan. “Our finance team and our Board of Education Finance Committee have made it a priority to ensure the good financial health of our district. S&P Global Ratings’ revised outlook demonstrates their success.”
S&P Global Ratings said the district weathered the financial and economic impact of the COVID-19 pandemic, including delays in state aid payments. In addition, a fiscal 2021 deficit was due to accounting related to prior capital projects and is not indicative of operational imbalances, further supporting the stable outlook.
Additionally, S&P Global Ratings said Minisink Valley’s financial position remained resilient during the pandemic and the district expects to end fiscal 2022 with surplus operations. This would further bolster its very strong reserve position.
S&P Global Ratings also said this now alleviates its previous opinion of risk related to reserve drawdowns between fiscal years 2017 and 2019, when the district used reserves for capital projects to bring its fund balance closer in line with state mandates.
S&P Global Ratings noted the district’s proximity to the broader New York City area stabilizes its economy, and real estate market activity has been very strong throughout the pandemic. Fixed-cost carrying charges for debt, pensions, and other postemployment benefits (OPEB) are limited, in part thanks to the district’s 80 percent building aid ratio and strong pension plan funded ratio. However, a longer-term risk is the elevated OPEB liability, especially given the district’s statutory inability to prefund this liability.