S&P Global Ratings (S&P) announced that it has upgraded our long-term credit rating to “A+,” a significant improvement from the ‘BBB+’ rating we received in 2021. This upgrade marks a major milestone for Montgomery Public Schools and reflects the hard work and dedication of our leadership, staff, and community in strengthening our financial position and planning for a brighter future.
This upgrade replaces the ‘BBB+’ rating we received in 2021 when we emerged from more than four years of oversight by the Alabama State Board of Education. In assigning us the A+ rating, S&P recognized our “vastly improved and sustained financial position,” as well as our “careful expenditure control, conservative budgeting, and regular monitoring.” This acknowledgment is a testament to the dedication and discipline of our leadership and staff in managing the resources entrusted to us.
The primary benefit of this A+ upgrade is the significant reduction in borrowing costs.
With a stronger rating, we’ll be able to secure lower interest rates when financing future capital projects, allowing us to invest more in our schools. Chris Williams, managing director of Rice Advisory LLC, who managed the rating review process, called it a “home run” with multiple benefits. As he explained, “The higher rating by itself will result in lower interest rates, but it also opens the door to a larger pool of institutional investors who will be willing to buy the system’s bonds.”
With our new A+ rating, we expect the number of institutions looking at our bonds to potentially triple, creating competition among investors. This competition will further lower borrowing rates and bond insurance premiums, which will save millions of dollars for our school system and help us stretch taxpayer dollars even further.
Pamela Watkins, our Interim Chief School Financial Officer, took the lead in managing the review process. “This review, and the resulting upgrade, demonstrates that our leadership—both at the Board and staff level—is exhibiting good stewardship of the tax dollars we are entrusted with.” Her leadership, along with the commitment of everyone involved, has been integral to this achievement.
The S&P report also highlighted several key factors that contributed to the upgrade, including stabilized enrollment, healthy financial reserves, and new developments in the local economy. Notably, the jump from ‘BBB+’ to ‘A+’ is a “three-notch” upgrade, which is rare in municipal finance.
This upgrade doesn’t just reduce our borrowing costs for long-term bond issues; it will also improve the terms on other financing agreements, like school bus and equipment financing. These improved conditions will allow us to allocate more resources directly to supporting our students and schools.