Niskayuna school credit rating hurt by reserve trim, high indebtedness

PHOTOGRAPHER: Michael Goot

Moody’s Investors Service has downgraded the Niskayuna Central School District’s credit rating for draining its reserves to low levels and having a high debt burden.

The bond rating agency lowered the bond rating one notch from Aa2 — the third-highest rating — to Aa3.

The district had $11.6 million in reserves at the end of the 2009-2010 year and that figure is down to $7.3 million now. However, most of that surplus is designated for specific items such as tax challenges and retirement costs.

Niskayuna had only $20,000 of so-called “undesignated” fund balance that can be used for anything as of June 30 of this year with $7.3 million designated, according to district spokesman Matt Leon.

“The downgrade reflects the district’s narrowed reserve levels with expectation that these levels will be maintained over the near term,” the report read.

“Additionally, the downgrade considers the district’s smaller tax base combined with an above-average debt burden that remains elevated despite building aid support.”

The fund balance is less than 1 percent of the district’s $75.2 million budget.

The district is currently carrying more than $84 million in outstanding debt — mostly from the $94.5 million capital project completed a couple years ago that renovated all the schools. The district is paying about $10 million per year on the debt and gets about 70 percent of that back through state aid, according to the report.

REVENUE DIP

The report says that the district’s surplus account technically was $1.5 million in deficit at the end of fiscal year 2011 because revenues were about $780,000 lower than expected and the district spent $2 million for emergency projects. This included cleaning up of soil at Niskayuna High School that stemmed from the discovery of an underground fuel tank at the start of the district’s capital project and connecting Glencliff Elementary School to Clifton Park municipal sewer to replace the district’s failed septic system at the school.

The district lost about $432,000 last year as the state phased out funding related to those two projects.

Leon said final expenses for the 2011-2012 year were lower than budgeted and some designated reserves were used to replenish the fund balance.

The report stated that the school officials routinely underbudget revenues by $1.5 million and overstate expenditures by $1.25 million to have a cushion to build up the surplus.

Leon said the district needs to use about $2.5 million of its fund balance every year to have sufficient cash on hand to run operations until it receives state aid and property tax revenues, which come in later in the year. This allows the district to avoid short-term borrowing costs.

The Moody’s report did say that the district benefits from a stable local economy with multiple large employers such as General Electric, Lockheed-Martin and Schenectady Chemical and its proximity to Albany. Also, its wealth is above average with median family income roughly $116,388.

District officials noted that Niskayuna retained its excellent AA+ rating by Standard & Poor’s rating agency.

School officials said they have used surplus to maintain the quality of education as the state cut the district’s aid by $8 million during three years. This year’s $75.2 million budget is $1.85 million less than last year.