Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Bond Credit Ratings topic
No spam. Unsubscribe anytime.
Associate superintendent outlines Kyrene's bond ratings and relatively low reserve balances
Summary
Associate Superintendent Chris Herman told the board Kyrene holds a Moody's AAA GO rating and an S&P AA GO rating but has operating reserves of 31.8% of operating revenue—well below the peer average—and said rating agencies emphasize trends and balanced budgets over a single —magic number.
Associate Superintendent Chris Herman presented a study-session overview of bond credit ratings and reserve (fund) balances, telling the Kyrene Elementary District Governing Board that ratings reflect a district's ability to repay debt and are sensitive to reserve trends and budget balance. Herman said Kyrene has a Moody's triple-A general obligation (GO) rating and a double-A GO rating from Standard & Poor's.
Herman said Moody's and S&P evaluate multiple factors, including institutional framework, financial performance, enrollment trends and leverage, and that rating agencies examine reserve balances as a percentage of operating revenue to normalize across differently sized districts. "Reserve balances are necessary to help mitigate volatility or uncertainty from various funding sources," Herman said, summarizing the district's rationale for maintaining carry-forward funds.
Kyrene's most recent data shows an operating reserve equal to 31.8% of operating revenue (up from 24.9% in 2020), Herman said. He contrasted that with the peer group of Moody's-rated districts, which had an average operating-reserve percentage of 54.5%. He estimated it would take roughly $45 million of additional reserves to match that peer average.
Herman cited two examples where reserves proved essential: use of reserves to maintain payroll during the COVID-19 pandemic and a $4.8 million repayment the district made after the Quasi Meyer v. Maricopa County settlement in 2024. He urged the board to focus on trends and the ability to produce balanced operating budgets rather than a single threshold. "They will never give you a magic number," he told the board about rating-agency guidance, adding that agencies prioritize whether reserves are stable or declining.
Board members asked clarifying questions about what funds Moody's counts in its operating-reserve definition, the role of ESSER pandemic dollars in year-to-year comparisons, and whether state-level factors constrain local districts. Herman said Moody's uses ACFR information and a defined set of funds (general fund, certain special revenue, capital projects and debt service) when computing the operating-reserve percentage and that state funding unpredictability factors into institutional-framework scores.
The study session closed with staff saying they will present further budget and reserve recommendations to the board in early June when final figures are available.
