Moody's Investors Service found credit positives in the voter approval of measures to help finance two of California’s large school districts.
Voters overwhelmingly supported a parcel tax levy on properties in San Francisco and a $7 billion bond measure in Los Angeles.
The San Francisco Unified School District’s parcel tax would increase teacher salaries. The $7 billion general obligation bond measure floated by Los Angeles Unified School District would improve school facilities.
San Francisco’s Measure J authorizes a $288 per parcel tax starting July 1, 2021.
“The approval is credit positive for the district, because the parcel tax will legally replace an existing parcel tax, under Proposition G, which continues to face a court challenge that has prevented the district from accessing the revenue,” Moody’s wrote.
The parcel tax, expected to generate around $48.1 million annually, would also help the K-12 school district to avoid having to make significant expense cuts in fiscal 2022 and avoid a further weakening of its already narrow reserves. It would allow the district to maintain 7% salary increases negotiated in 2018 for teachers and paraeducators in order to help retain educators in a region with a very high cost of living.
Moody’s deemed the passage of Los Angeles’s bond measure modestly credit positive because it indicates continued support from taxpayers to financially support LAUSD. The district has struggled for several years amid increasing competition from charter schools, and increasing investment in facilities might also help attract or retain students, Moody’s wrote.
It also authorizes a property tax revenue stream that would not otherwise be available for capital funding and fulfills the district’s strategic initiative to improve facilities to enhance student retention, Moody’s wrote.
If the measure had failed, Moody’s wrote, it may have forced the district to close facilities and/or increased stress on general operating revenue to fund an estimated $50 billion in capital improvement needs.
