U-46 gets upgraded financial ratings

Moody's Investors Service and Standard & Poor's have upgraded Elgin Area School District U-46's ratings in recent reports, a move district officials expect to help with interest rates in upcoming bond sales.

The district is rated A2 by Moody's for the sale of $35.7 million in bonds, and AA by Standard & Poor's.

The sale breaks down into $15 million in tort bonds, used for legal purposes, $15 million in health and life safety bonds and $5.7 million to refinance older bonds.

According to the Moody's report, the firm "expects the district's financial performance will remain stable over the near-term despite continued expenditure pressures."

The district, the report noted, has weathered ongoing property tax and state aid revenue disruptions without issuing tax anticipation warrants or opening lines of credit.

However, while the U-46's education fund has a positive balance, several funds are pressured, the most difficult being the tort fund because of a five-year-old racial bias lawsuit.

The suit not only "creates significant legal costs for the district," according to the report, but "management expects that expenditures in this fund will continue to exceed revenues as long as the district remains party to the lawsuit which is likely to continue over the (next two to 10 years)."

Eliminating $39 million of deficit in four years without an operating rate increase was called "a significant accomplishment that forms the foundation of this assessment."

Standards and Poor's noted the district is budgeting for break-even operations in fiscal year 2010.

"(The) district will be challenged to implement budgetary cuts in an amount sufficient to counterbalance slow or possibly flat growth in the tax base and late state aid payments," the report notes.

The board will consider approving the bond sale at Monday's meeting. They will also be presented with next year's budget.