Report Cites ‘Rapid Financial Deterioration’ for Robbinsdale Schools’ Credit Rating Drop
The credit rating for Robbinsdale Area Schools saw a decline of two steps, according to a report from S&P Global Ratings.
The report cited the district’s “rapid financial deterioration” as a reason for the rating downgrade.
The district’s credit rating dropped from an “A-” to a “BBB.” The drop means the district’s interest rate to borrow money will go up.
Robbinsdale Area Schools plans to sell bonds to finance long-term facility maintenance.
In anticipating the rate drop, the district’s new chief financial officer, Kristen Hoheisel, said administration pivoted from a competitive market sale of bonds to a negotiated sale, saying it well help minimize the cost impact.
“We will have interest rate increases, but they won’t necessarily be as significant had we stuck with the original line of sale,” Hoheisel told the board at its Nov. 4 meeting.
The S&P Global Ratings report cited “another sizable deficit” projected for next year that “would further deplete the district’s reserves.”
“The district’s recent and projected financial performance, which is much weaker than previous district estimates, stems in part from weak financial management practices and governance as well as inadequate controls over financial reporting,” the report read.
The report also noted that district reserves “remain low compared with those of peers and below the district’s formal 6.5 percent fund balance policy.”
A new labor contract that involves “significant salary increases” contributed to an anticipated $11 million general fund deficit in fiscal year 2024, compared to a $795,000 surplus originally budgeted, the report said.
‘Steps in the Right Direction’
The district has experienced enrollment declines, further dampening its economic outlook.
Robbinsdale Area School Board member Kim Holmes acknowledged community concern and says the district has brought on a new superintendent and chief financial officer to help address the situation.
“The board has a real opportunity here to make changes in terms of bringing on an experienced superintendent who hired a very experienced chief financial officer. So we’re taking steps in the right direction.”
Robbinsdale School Board Member Kim Holmes at the Nov. 4 meeting
Superintendent Teri Staloch began her duties in July, while Hoheisel started in August.
The Robbinsdale Area School Board will be asked to approve the bond sale for facility needs at its Nov. 18 meeting.
The district also plans to hold a town hall meeting on its budget on Nov. 20.
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