I know of a lot of nonprofits who have used bonds to raise money in recent years. There can be some real advantages for Boards who are looking to raise funds using the tax advantages of bonds... but what happens if those bonds get downgraded?
Aaron Cahall at The Examiner explains the impact such a downgrade had on the Baltimore Aquarium:
Last month, Fitch Ratings downgraded its rating for the aquarium’s approximately $34 million in bonds to “BBB+” from “A+”, citing the attraction’s diminished liquid assets and declining attendance. In early September, Moody’s Investors Service lowered its rating on the bonds from A3 to A2, and both firms held a negative outlook at the lower levels.The institution has $23 million on hand, which is down from previous years... and it needs to find a way to push for new fundraising opportunities.
Contributions and grants totaled $9,532,193, or 23 percent of the aquarium’s $41.7 million budget last year, according to its 2006 annual report. Approximately 50 percent of the aquarium’s revenue comes from admissions, said Molly Foyle, director of media relations for the aquarium, with 30 percent from gift shop and on-site revenues and 20 percent from city, state and private contributions.To be honest, I don't think this is going to be the only group that has their bond ratings lowered over the next few months.