West Central School District No. 49-7, SD, GO Bond Rating Lowered To 'AA-' From 'AA' On Decreased Reserves


CHICAGO (S&P Global Ratings) March 12, 2019--S&P Global Ratings lowered its 
long-term rating on West Central School District No. 49-7, S.D.'s general 
obligation bonds outstanding to 'AA-' from 'AA'. The outlook is stable.

"The downgrade reflects the district's reserve position that has decreased to 
an estimated 8.1% of operating expenditures in fiscal 2018 from 41% in fiscal 
2013, which is no longer comparable with those of its peers at the 'AA' rating 
level," said S&P Global Ratings credit analyst Andrew Truckenmiller. 

The rating reflects our view of the district's: 
  • Participation in the broad and diverse Sioux Falls metropolitan statistical area (MSA);
  • Very strong income indicators and market value per capita;
  • Strong reserves based on the fiscal 2017 audit; and
  • Moderate overall net debt burden.
Offsetting the above factors is the district's recent fund balance 
deterioration.

The stable outlook reflects our expectation that the district will maintain 
reserves in accordance with its target of 15% of expenditures, as shown in its 
long-term financial projection, a level that we would still consider very 
strong. The district's proximity to the Sioux Falls MSA adds stability to the 
rating. Therefore, we do not expect to change the rating over the two-year 
outlook period.

Should the district's budget remain at an imbalance even after it receives the 
additional revenue from the opt-out levy, and available reserves decline to a 
level no longer commensurate with those of its peers, we would likely lower 
the rating.

If the district's reserve position were to materially increase over a 
prolonged period and the district is able to demonstrate budgetary balance, we 
could raise the rating.

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