Standard & Poor's Ratings Services said it raised its school issuer credit rating (ICR) on Cleveland Municipal School District, Ohio's general obligation (GO) debt to A-minus from BBB-plus.
The outlook is stable.
At the same time, S&P assigned its A-minus ICR to the district's series 2013 unlimited-tax GO school improvement refunding bonds, and assigned a AA long-term rating to the series 2013 bonds and affirmed its AA long-term rating and underlying rating (SPUR) on the district's existing GO debt, reflecting the district's eligibility for and participation in, the Ohio Credit Enhancement program. The outlook on all ratings is stable.
"The upgrade to A-minus reflects the passage of a 15-mill operating increase and management's proactive steps to improve operations," said Standard & Poor's credit analyst Carol Hendrickson, "which we believe has significantly stabilized the district's previously weak finances."
The school ICR also reflects the district's: willingness and ability to make necessary adjustments to offset enrollment declines and other financial pressures to maintain at least adequate cash reserves; total projected operating cash balances which officials project will be a good 8.2% of expenditures to end fiscal 2013 and a good 7.9% of expenditures to end fiscal 2014; moderate overall net debt burden; and participation in Cleveland's deep and diverse economic base.
The following characteristics constrain the rating: a lack of sustained historical support for new operating levies, in part due to infrequent levy referenda; declining enrollment and assessed value; and low per capita effective buying income.
The AA program rating reflects the strength of the Ohio State Aid Intercept program, which provides liquidity and credit support on the bonds; therefore, the long-term rating on the bonds is linked to the intercept program rating. The intercept program rating is AA for districts that meet certain criteria, including Cleveland City School District.
