TAVARES – Two credit rating agencies issued reports this week praising Lake County Schools for prudent spending and robust policies and practices that guide the district’s finances.
The report from S&P Global Ratings describes the district as having a proactive management team that is focused on long-term planning to ensure operations remain stable in the face of growth. “Conservative budget assumptions inform annual budgets, along with historical trend analysis,” the S&P report reads. “The district's comprehensive five-year financial forecast and five-year capital improvement plan demonstrate a focus on long-term decisions. In addition, there are formal policies guiding debt, investments, and reserves.”
It acknowledges that “management’s prudent budgeting and robust policies and practices, which it has been diligent in following, should foster continued positive results over the outlook period.”
The report from Fitch Ratings focuses, in part, on the district’s financial reserves. “Although recent reserve levels have been bolstered by pandemic-related federal aid, and some reduction is anticipated due to the expiration of Elementary and Secondary School Emergency Relief (ESSER) funds, [we expect] continued prudent management of spending, aligning with revenue changes, to maintain reserves in the range of 5 percent to 10 percent of spending,” it reads.
The School Board experienced two consecutive operating deficits in fiscal years 2016 and 2017, which reduced its unrestricted reserves to about 3 percent of general fund spending. Since then, the board has achieved consecutive operating surpluses, with reserves nearing 15 percent of spending in fiscal year 2024.
The Fitch report also noted that while the board does not have any near-term debt plans and capital needs are being funded primarily through the board’s local capital outlay levy, local sales tax, and impact fees, some level of future borrowing is to be expected as the board will need to build new schools to accommodate growth.
Fitch Ratings has assigned a “AA” rating to the Lake County School Board’s $32.6 million refunding certificates of participation (COPs), series 2025A. S&P Global Ratings affirmed its “A+” rating on existing COPs.
A COP is a financial instrument, or lease-financing agreement, used by governments to finance capital projects. Investors receive a share of the revenue generated from the lease of the property or equipment. The COPs are expected to sell next week, and proceeds will be used to refund the outstanding COPs for savings.
Fitch has also upgraded the board’s Issuer Default Rating to “AA” from “AA-,” reflecting the view that the board’s financial profile has strengthened, driven by higher reserve levels in recent years.