KBRA Assigns AA- Rating with Stable Outlook to Canutillo Independent School District, Texas, Unlimited Tax Refunding Bonds, Series 2025
9 Oct 2025 | New York
KBRA assigns a long-term rating of AA- to the Canutillo Independent School District (the District), Texas, Unlimited Tax Refunding Bonds, Series 2025 (the Bonds). Concurrently, KBRA affirms the AA- rating on the District's outstanding debt. The Outlook is Stable.
Proceeds of the Bonds will refinance certain outstanding Bonds of the District and fund the costs of issuance. The Bonds are payable from a direct and continuing pledge of ad valorem taxes levied on all taxable property within the District, without limitation as to rate or amount. The Bonds are expected to be guaranteed by the Texas Permanent School Fund (PSF) guarantee program for the full and timely payment of principal and interest. KBRA’s rating for the Bonds is based solely on the underlying credit standing of the District without consideration of the support afforded by the PSF guarantee program.
Key Credit Considerations
Credit Positives
- The District’s strong growth trends in terms of population and tax base valuation due to its location along the important Interstate 10 corridor.
- Sound level of reserves with an unassigned fund balance ratio of 17.7% as of the end of fiscal year 2024.
- Depth of the management team and sound polices to guide the District through current financial challenges.
Credit Challenges
- Stagnant enrollment and strong competition from neighboring districts which may increase with the implementation of Texas’ private school voucher program that may further syphon from the District’s student base.
- Limited flexibility to generate additional resources based on state school funding restrictions in the face of increasing expenses, resulting in recent operating deficits.
- Already high and increasing debt burden as District implements multi-year capital program to relocate and reconstruct its aging school infrastructure.
Rating Sensitivities
For Upgrade
- Increased enrollment resulting in generation of additional revenues based on state’s per student funding formula producing consistent operating surpluses without the use of one-time revenues.
- Growth in reserves to a level that is consistently above the District’s 90 days of expenditures policy target.
For Downgrade
- Continued trend in operating deficits resulting in unassigned reserves falling below 10% on a sustained basis.
- Decreasing enrollment trend resulting from increased competition that erodes revenue generation and increases financial pressure on the District.
- Construction risk associated with current capital plan resulting in significant increased costs prompting need for additional debt beyond current authorization.
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