The School District of Broward County, Florida, issued $269.3 million in tax anticipation notes to finance its operating expenses for the upcoming fiscal year.
The notes mature in June of next year and yield 3.35%. They pay interest at 4%. The securities received a rating of MIG 1 from Moody’s Investors Service, which revised the school district’s outlook to negative from stable in May.
“The negative outlook reflects recent declines in fund balance and the expectation of an additional decline in fiscal 2024,” Moody’s analysts wrote.
The district’s general fund balance fell more than 12% last year, from $218.1 million in 2022 to $190.9 million last year, according to the official statement accompanying the sale of the notes. That brought the school district’s general fund ending balance to 3.6% of its general fund revenue. If the district expects its balance to fall below 3%, it must alert the school board and Florida’s commissioner of education.
Moody’s analysts wrote that they expect declines this year to result in an available fund balance above that threshold, between 4% and 5%. However, they wrote that “additional declines in fiscal 2025 and the lack of a plan to rebuild fund balance in line with historic levels will likely result in a downgrade.”
Broward County is the second-most populous in Florida and includes the city of Fort Lauderdale. The district will use the proceeds from the sale of the notes to fund its expenses for the fiscal year that began July 1 in anticipation of the receipt of property taxes.
The notes are special, limited obligations of the school district, secured by property taxes.
J.P. Morgan Securities LLC served as underwriter on the issuance, purchasing the notes for more than $270 million. The price reflected a premium of almost $1 million. PFM Financial Advisors LLC acted as municipal advisor.