Posted on March - 29 - 2010
Fitch revises Cleveland schools’ credit rating outlook to negative from stable
The Fitch credit rating services has affirmed its BBB+ rating on two series of general obligation bonds of the Cleveland Metropolitan School District, but has revised its rating outlook for the district to negative from stable.
Fitch said the negative outlook reflects the district’s weakened financial position “and the need for significant changes to align spending with available revenues.”
“With a lack of voter support for operating levies and few other options to increase revenue, the district must make meaningful expenditure adjustments,” Fitch stated. “The district is currently negotiating bargaining unit contracts, which will be crucial to its ability to reduce spending.”
Fitch said the district’s general fund reserves “were minimal in 2009 and are expected to be nil in 2010.”
“The district has approved and will implement a transformation plan which includes spending cuts, including a sizable number of school closures; this and other actions will be necessary to restore fiscal balance in 2011 and beyond,” Fitch stated.
Fitch said a downgrade of the district’s credit rating “may result from a combination of one or more of the following: failure to achieve a favorable outcome with bargaining units to make meaningful spending cuts; lack of progress on the transformation plan; and/or lack of stabilization and little improvement in financial position.”
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