CREDIT RATING INFORMATION
Moody’s Investor’s Service (“Moody’s”), Kroll Credit Rating Agency & Standard & Poor's (S&P) reviewed for indicative credit purposes the business fundamentals and financial condition of the Cobb County School District. In December, 2022, all three of these credit rating agencies assigned a Triple A (Aaa/AAA) Credit Rating to the Cobb County School District (CCSD). These ratings are the highest rating available to governmental entities.
CCSD is the only school district in the entire country to hold these three AAA credit rating designations. CCSD has previously held the Aaa Crediting rating from Moody’s since 2015. The additional AAA credit rating designation in 2019 from Standard & Poor’s and another AAA credit rating designation from Kroll in 2021 further underscores CCSD’s excellence in financial operations.
This rating is the highest credit rating available for a government entity and the first time in history that the district has received the highest rating from three (3) of the major credit rating agencies. The AAA rating reflects the district’s sizable and diverse tax base, sound reserve position characterized by conservative budgeting and formal financial policies and an above average pension burden, mitigated by the absence of any long-term debt.
Credit ratings represent the credit worthiness of corporations and government entities. In investment, the credit ratings are published by credit rating agencies and used by investment professionals to assess the likelihood a debt can be repaid. Ratings play a critical role in determining how much companies and government entities that issue debt have to pay to access credit markets. Ratings determine borrowing costs and the amount of interest they pay on their issued debt.
A Credit rating is also an indicator of an organization’s skill and experience with regard to financial operations including budgeting & forecasting, cash management, financial reporting, accounting and financial management.
The Credit rating industry is highly concentrated with the two largest rating agencies, Moody’s Investors Service and Standard & Poor’s having roughly 80% market share globally.
It is extraordinarily difficult to achieve an Aaa rating. As has been widely reported in the business press, the 2008-2009 crash was so bad that by the end of the economic downturn period, there were only TWO S&P 500 companies left that could boast a AAA credit rating. An evaluation of state governments reveals that out of the 50 states in the US, only 15 states (30%) currently hold a AAA Credit Rating.
It is even more difficult for public school districts to achieve a Aaa rating because of limited diversity in General Fund revenue streams and limited flexibility to cut services because students in public schools have to receive an education. By contrast, cities and counties have a wider range of revenue options and have more flexibility in their expenditure budgets. An evaluation of public school districts in the United States reveals that only 0.50% hold a Aaa Credit Rating.
Credit Ratings are assigned using letter designations which represent the quality of investments and organization financial management. The following chart provides a listing of rating designations:
Rating Tier Definitions:
|Moody’s||Standard & Poor’s||Kroll||Credit Rating Description|
|Highest Prime Grade|
|Aaa||AAA||AAA||An obligor has extremely strong capacity to meet its financial commitments|
|Aa1||AA+||An obligor has Very Strong Capacity to meet its financial commitments|
|Aa2||AA||An obligor has Very Strong Capacity to meet its financial commitments|
|Aa3||AA-||An obligor has Very Strong Capacity to meet its financial commitments|
|AA||Determined to have minimal risk of loss due to credit-related event|
|Upper Medium Grade|
|A1||A+||An obligor has strong capacity to meet its financial commitments|
|A2||A||An obligor has strong capacity to meet its financial commitments|
|A3||A-||An obligor has strong capacity to meet its financial commitments|
|A||Determined to have small risk of loss due to credit-related event|
|Lower Medium Grade|
|Baa1||BBB+||An obligor has adequate capacity to meet its financial commitments|
|Baa2||BBB||An obligor has adequate capacity to meet its financial commitments|
|Baa3||BBB-||An obligor has adequate capacity to meet its financial commitments|
|BBB||Determined to have some risk of loss due to credit-related events|
|Non-investment Grade Speculative|
|Ba1||BB+||An obligor is less vulnerable in the near term than other lower-rate obligors|
|Ba2||BB||An obligor is less vulnerable in the near term than other lower-rate obligors|
|Ba3||BB-||An obligor is less vulnerable in the near term than other lower-rate obligors|
|BB||Determined to have moderate risk of loss due to credit-related events|
|B1||B+||An obligor is more vulnerable than obligors rate BB|
|B2||B||An obligor is more vulnerable than obligors rate BB|
|B3||B-||An obligor is more vulnerable than obligors rate BB|
|B||Determined to have high risk of loss due to credit-related event|
|CCC||Determined to have high risk of loss due to credit-related events near default|
|C||Determined to be near default with low recovery expectations|
|Caa3||CCC-||CCC-||Default Imminent with little prospect for recovery|