TAHOMA, Calif. — Moody’s Investors Service said it has placed San Francisco Community College District’s A1 rating on review for possible downgrade ahead of a decision on its accreditation.
The move impacts $358 million of the district’s general obligation debt.
“This action is prompted by the upcoming decision by the Accrediting Commission for Community and Junior Colleges to determine if the district has made sufficient progress to address material deficiencies in accreditation standards and requirement,” Moody’s said in the report Friday afternoon.
Despite concern over the accreditation, it is unlikely to have much of an impact on bondholders since its outstanding debt is backed by San Francisco’s full faith tax pledge. The bonds are backed by the ad valorem property taxes levied by the city’s treasurer, who also holds onto the funds for debt service payments.
Moody’s said possible outcomes include removal of sanction, affirmation of accreditation, extension of current sanction level, change in sanction severity, or loss of accreditation.
“Termination of accreditation would be a material credit weakness due to the impact on enrollment and ultimately state funding (56% of unrestricted General Fund revenues),” the report said.
Moody’s already has a negative outlook on the district’s debt.
The ratings firm said the district’s management has made several changes to address ACCJC’s recommendations since the show case sanction was placed on the district in July 2012.
Moody’s said it will evaluate the ultimate decision expected in mid-summer and review its implications. The community college must show cause by June 2013 why it shouldn’t lose its accreditation by correcting problems that have been outlined in previous reviews.
A parcel tax in San Francisco to help fund the college, which serves 100,000 students, passed in November.
Part of the district financial problems were due, according to a state review last fall, to much higher employee costs than comparable districts.
