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CARSON CITY, Nev. (AP) — A major credit ratings agency says it's uncertain how the planned breakup of the Clark County School District could affect the credit worthiness of the nation's fifth-largest school district.
Moody's Investors Service did not downgrade the district's A1 low-risk investor grade rating but said in a report issued Monday that the uncertainty represents a credit negative.
"It was exactly what we warned about at the hearings," said Clark County School District lobbyist Joyce Haldeman, who unsuccessfully pushed for the governor to veto AB394, which cleared the way for the breakup. "There are too many unknowns."
The report cited uncertainty over the new law, which creates a study to reorganize the district into a number of smaller entities by the 2018-19 school year. The entities would operate underneath the existing school district.
Moody's analyst William Oh wrote that uncertainty over the number of school precincts and their exact relationship with the district could lead to potentially negative effects on the credit quality of the district's $2.5 billion in outstanding debt. He said it could also have an effect on an estimated $4 billion in future bonding the district expects to take on to help replace and build schools.
"Because the details of the reorganization and its implementation have yet to be developed, we are uncertain how it would impact the credit quality of the district's outstanding debt, and future borrowings post-reorganization," he wrote.
Republican bill sponsor Assemblyman David Gardner disagreed and said the bill was amended to consider and address any potential negative effects to bonding. He said other issues would be worked out by an interim committee made up of lawmakers, legislative staffers and members of the public.
"I don't see how that's possible," he said, referring to a credit downgrade. "You'd have to change the bill to do that."
The measure doesn't specify how payments on the district's $2.5 billion in outstanding debt would be made after the reorganization, but includes bonding capacity as a part of the study required in the bill.
Any shake-up or reorganization won't happen immediately — members of the advisory committee won't meet before January, and the State Board of Education has until 2018 to adopt the plan.
Haldeman said the district still has problems with the breakup process spelled out in the new law. A proposal would go before a commission of lawmakers but doesn't require a green light from the full, 63-member Legislature.
"Since this is a change that will impact so many people," Haldeman said, "it should be done thoughtfully — not just be done by nine people."
Gardner said he wanted to work with the district and other stakeholders to work out any potential kinks in the plan.
"The idea was never to cram this down anybody's throat," he said.
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Associated Press writers Kimberly Pierceall and Michelle Rindels contributed to this report.
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