COEUR D'ALENE, Idaho — North Idaho College’s bond ratings are under review for downgrade, following recent actions by the board of trustees, as reported by our news partners, the Coeur d'Alene Press.
Moody’s Investor Services, a bond credit rating company, said in a Dec. 21 news release that “governance considerations, including board structure risks are a key consideration in this action,” which affects $7.9 million in rated debt.
“The board members’ very public disputes with one another, college leadership and external parties are negatively impacting NIC’s brand, which in turn could negatively impact student demand and operations,” Moody’s said.
Neither Sarah Garcia, the college’s vice president for business and finance, nor Greg McKenzie, the NIC board chair, responded Tuesday to requests for comment.
A bond rating is a grade given to bonds that indicate their credit quality. Independent rating services like Moody’s provide evaluations of a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion.
In December 2021, Moody’s revised the college’s rating outlook to negative while affirming its A1 issuer and A1 revenue bond ratings.
Since then, Moody’s said, the board has experienced “notable turnover,” with three trustees resigning in the space of a few months.
Moody’s noted, the college “benefited from a period of management stability” in mid-2022 when the Idaho State Board of Education appointed three temporary trustees, who in turn hired Nick Swayne as NIC’s permanent president.
But healthy financial performance is less certain for the coming year, Moody’s said, despite increases in state aid and property taxes.
“Ongoing board dysfunction, including the placement of the president on administrative leave, and the upcoming visit from NIC’s accrediting body, has reportedly negatively impacted student interest, enrollment and retention,” Moody’s said.
That dysfunction cost NIC its insurer last year, according to Moody’s, and resulted in two warning letters from the Northwest Commission on Colleges and Universities, its accreditation organization.
The college also faces litigation on multiple fronts after placing Swayne on administrative leave for unclear reasons in early December. Swayne filed a lawsuit last month, asking the court to restore him to his position.
Trustees voted 3-2 last month to hire Greg South to serve as the college’s acting’s president while Swayne remains on administrative leave.
A concern of the financial risk assessment firm was that the NIC board had not approved the college’s fiscal 2022 audit, which was presented to the trustees Dec. 5, but it was not accepted as approved at that time. The financial audit was approved by the NIC board Dec. 21.
“Future reviews and resolution of the RUR (ratings under review) will focus on receipt of timely financial information, including the fiscal 2022 audit, as well as a clear remediation plan as to how the college plans to stabilize its leadership vacuum, particularly in the office of the president, and address the concerns outlined by NIC's accrediting body, which is due to visit the college in April 2023,” said the Moody’s release.
Moody’s also noted the NWCCU had issued a letter Dec. 17 to NIC, cautioning the college is at risk of being out of compliance with accreditation eligibility requirements and standards. The college has until today to respond and explain how it is not out of compliance.
“Absent current financial information and meaningful steps taken to stabilize leadership and address accreditor’s concerns, multi-notch rating action could be warranted,” Moody’s said.
NIC has historically reported good operating performance, with increasing cash reserves and low debt, according to Moody’s. The college also benefits from diverse revenue streams, including property taxes, state aid and tuition and fees.
Issued by the North Idaho College Dormitory Housing Commission, the bonds are payable from a mandatory student union fee and net revenues of the dormitory system and Student Union Building, as well as fund balances from these revenues and fees. The bonds have a final expected maturity in 2045.
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