SAN FRANCISCO — Oakland Unified School District lost its only remaining rating last week after Moody’s Investors Service pulled its coverage of the district with more than $700 million of general obligation debt outstanding.
Moody’s said it yanked its rating on the district’s GO bonds because it hasn’t released an audited financial report for the last three fiscal years. Standard & Poor’s pulled its rating on the district’s GO debt last year for similar reasons.
“The absence of up-to-date, audited financial information is particularly critical to our rating review given the difficult fiscal environment for California school districts,” Moody’s said.
School districts in California have been under financial pressure amid state cuts to education and falling property values that determine the amount of tax revenue they collect.
Several series of the district’s GOs that are outstanding will still carry the insurer ratings of National Public Finance Guarantee Corp. and Assured Guaranty Municipal Corp. The district hasn’t released a comprehensive audited financial report since 2009 even though it has released unaudited statements.
In 2009, Oakland Unified came back under local control after the state took them over in 2003 during a financial crisis. The school district received a $100 million loan from the state under the condition that they would be placed under state control. The district still owes the state $70 million.
Troy Flint, a spokesman for the school district, said the lack of up-to-date audited financial reports is mainly a result of the state receivership.
“Our position is that this is an oversight by the state and that they haven’t moved in a timely fashion and the district is being held accountable in a way that is unfair,” Flint said. “We don’t want people to think Moody’s decision is a negative verdict on the financial condition of the organization.”
He said the district may in the near future ask voters to approve another bond authorization for school construction.
The district last went to market in 2009 with $88 million of general obligation bonds and $71 million of general obligation Build America Bonds approved by voters in 2006. The BABs maturing in 2034 sold with an interest rate of 9.5%, while the majority of the GOs carried a 6.25% to 6.5% rate. At the time, they carried a BBB-plus from S&P and a Baa1 from Moody’s.
