A Utah school district's pursuit of debt issuance despite public opposition sparked a general obligation downgrade to A1 from Aa2 by Moody's Ratings.
Box Elder School District is scheduled to sell $52.69 million of certificates of participation on Wednesday through BofA Securities to finance new and expanded school buildings. The deal marks the district's third attempt to issue debt after voters rejected $220 million of general obligation bonds
"The downgrade reflects weakened governance and elevated social risks, demonstrated by the district's current capital financing strategy, which was advanced despite strong opposition by the community to the district's previously proposed and larger financing plans," Moody's said in a rating report last week. "These developments exposed tension between the district and its electorate, which could erode community support for future revenue-raising and capital financing initiatives."
School officials listened to the public with a downsized debt issue that should be received favorably by investors, according to an emailed response to questions from District Superintendent Keith Mecham.
"Box Elder School District has elected to put the students first, which is what we are trying to do," the response said, adding that the financing for "critical projects" will not require a tax increase.
Moody's said the A1 rating "reflects the district's financial position, which will remain strong, supported by conservative budgeting and solid reserves."
It rated the COPs A3, noting the district will have about $75.5 million of outstanding debt post issuance. Payments on the COPs, which are structured with serial maturities from 2027 through 2046, are subject to annual appropriation, according to the preliminary official statement.
The northwest Utah district operates 23 schools, serving about 12,500 students.
Zions Public Finance is municipal advisor on the COP sale. Chapman is bond counsel.
