Improved credit rating to pare school borrowing costs

The Northern Ozaukee School District’s credit rating has jumped three levels in the last year and will lead to saving hundreds of thousands of dollars in district borrowing costs related to upcoming building projects, School Board members were told last week.

The district’s credit rating jumped from Moody’s Baa1, a medium grade, to A1, an upper medium rating.

That means the district will save about $500,000 on the $9.5 million the district is borrowing in the first phase of construction related to the building referendum that was passed in April, Kevin Mullen, senior vice president with Hutchinson Shockey Erley and Co. in Milwaukee, told board members last week.

The improved credit rating also will give the district flexibility when it goes to borrow $5.5 million in remaining referendum funds next September.

Factors influencing the new rating, Mullen said, included:

Good to strong income indicators coupled with extremely strong market value per capita. That includes an equalized value in the district of $605.2 million, up 6.5% since 2016.

School enrollment, which drives state funding, has risen each of the last three years and today stands at 743 students.

The district has built up its cash reserves to $868,000, or 6.9% of expenditures, which the rating agencies termed “good.”

The district’s debt burden was rated low and even after borrowing related to the referendum is included it will still be considered moderate. Debt service constitutes 7.8% of total spending.

Mullen said the rating is expected to not change for at least two years, though cutting into financial reserves or increased borrowing could have a negative effect.

It was good news to board members.

“This is something our district has struggled with for some time,” board member Dan Large said.

District Supt. Dave Karrels said the credit rating improvement is due to across-the-board improvements in the district over the past few years.

“We’ve been able to retain staff and that causes families to want to stay. We’ve had some recognition and financially, we’ve really tried to make it a priority where we spend each dollar wisely and that our spending is focused on our goals and priorities as a district.”

“The next jump will be in response to a larger broader economy. That’s not something you or a school district can manage,” Mullen said.

District officials said they are hopeful that recent economic development efforts in association with the village could pay future dividends.