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Stability in management and financial position leads to a credit rating upgrade for Hayward USD
Posted 9/9/20

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Hayward, CA--The Hayward Unified School District received an upgraded credit rating from Moody’s and a stable outlook from Standard & Poor’s. Both are considered among the top three credit rating agencies in the industry. The upgraded rating to near high-grade investment status and a stable outlook reflect the district’s efforts over the past three years to implement solid business practices.

 

Moody's and Standard & Poor’s provide international financial research on bonds issued by government entities. Both companies rank the creditworthiness of borrowers using a standardized ratings scale. In 2018, Moody’s rated HUSD at an A3 and in two short years upgraded HUSD two levels to our more recent A1 rating. This brings the district just shy of being categorized as a high grade investment. Credit ratings are extremely important because they convey to potential investors the risk associated with buying a certain bond. An investment grade credit rating indicates a low risk of a credit default, making it an attractive investment. A high credit rating for HUSD results in a lower cost of borrowing for its taxpayers, ultimately saving its taxpayers money.

 

Moody’s provided the following rationale for the upgrade, “The district's reserve and liquidity positions, while still relatively thin, have improved from narrow levels and stabilized under current management, a driver of the upgrade. Previously, historic turnover of prior administrations challenged the district's operations and ability to make systemic changes to ensure fiscal stability. Current management…launched a district-wide marketing and rebranding campaign, which supports our expectation of stability.” They go on to note, “The A1 rating continues to reflect the district's large tax base which is poised for additional growth, above average resident income measures and a local economy that is a part of the larger San Francisco (Aaa negative) Bay Area.” 

 

Standard & Poor’s - S&P assigned a A+ rating for the district, reaffirming their positive assessment of HUSD and is in alignment with Moody’s assessment. As a credit rating agency, the company issues credit ratings for the debt of public and private companies, and other public borrowers such as governments and governmental entities. S&P rates borrowers on a scale from AAA to D. 

Below is a scale of the credit ratings provided by the different rating agencies:

HUSD Ratings - Moody’s rating A1 and S&P’s rating is A+

 

credit rating

This news is a positive development for the Hayward community as it helps drive borrowing costs down when issuing remaining portions of the Measure H authorization and when refunding outstanding bonds (previously issued Measure I or Measure L bonds at a lower rate) Refunding outstanding bonds is similar to refinancing a mortgage. It reduces borrowing costs for our taxpayers, who have been incredibly supportive of HUSD schools. HUSD did a refunding in 2019 which saved taxpayers over $14M in gross savings or over $8M in present value savings. The latest refunding bond completed this month resulted in $18M in gross savings, or over $13M in present value savings. Therefore, in two years, HUSD has capitalized on its improved credit rating and historically low interest rates to save over $32M in gross savings, or $21M in present value savings to its community.