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The District issued its first bond sale of $150 million on April 3 and was able to maximize the amount based on recent credit rating reports. Little Elm ISD’s financial advisor, Derek Honea of RBC Capital Markets, presented credit rating information to the Board of Trustees at the April 16 Board of Trustee’s meeting. Honea explained how the District’s sound financial management helped it obtain AA- credit rating that assisted in the sale of the first bond. “We were able to sell the bond with the state’s permanent school fund guarantee with a rating of AAA which helped us achieve a low rate as well,” said Honea.
Last month, Standard and Poor’s (S&P) raised its Financial Management Assessment (FMA) of Little Elm ISD from “standard to good.” A good rating means the District maintains many best practices deemed as critical to supporting credit quality; particularly in the finance department.
The FMA measures the rigor of a government’s financial management practices; which is an important factor in S&P’s rating services analysis of the government’s creditworthiness. The S&P report highlighted the strength of the District’s financial plan by giving credit to conservative budgeting, capital improvement planning, long-term financial planning, and very strong reserves.
Credit rating agencies look at various factors such as outstanding debt, economic factors in the District, and financial management when assigning a credit rating. Honea gave credit to Little Elm ISD’s finance department and financial model, “I want to brag on your finance staff because I work with a lot of districts in the state and the financial model they have, the five year plan that Mr. Anderson has put together, I have not seen one that in-depth,” he said. “The rating analyst actually commented that he normally doesn’t see it with school districts. I think it was a big help to keep us at the credit rating level.”
Grant Anderson, associate superintendent and CFO, has been with the District for the last three years. His main objective has been to keep the District financially sound through establishing a financial infrastructure built on compliance, accountability, and transparency, along with a long-term financial plan. Critical to the financial plan and to transparency, is having frequent financial meetings with three school board members. “The purpose of these meetings is to give the Board members detailed financial information to help them make informed decisions that will benefit the students of Little Elm ISD,” said Anderson.
Anderson not only gives credit to the Board of Trustees, but also to Superintendent Daniel Gallagher and the administration for the team effort in maintaining public trust when it comes to the financial stewardship of taxpayers money. “I appreciate the support of Superintendent Daniel Gallagher, the Board of Trustees, and administration in their buy-in to the financial strategies the District has adopted,” said Anderson.
Here are the District’s strategies that help minimize the effect of the financial risk:
1. Maintain a strong and forward planning long-term financial investment (fund balance) policy
2. Establish financial systems and processes built on timing, transparency and accountability
3. Identify and monitor the major variables which generate district revenue
4. Identify, monitor and control major variables which generate district revenue
5. Maintain and monitor a forecasting model built on fiscally conservative budgeting methodology
Honea shared additional highlights about management that was cited in the S&P report, “Formal reserve policy that states the maintenance of a minimum 24% of expenditures, a level the District continues to exceed – I think having the fund balance that management has established has really helped us. I would recommend you keep it going knowing we will have additional debt moving forward. But because the District has a very solid financial plan, we should be in a good shape moving into the next bond sale,” said Honea.
Read more about Financial Transparency and Philosophy