KBRA Assigns AAA/K1+ Ratings to Various San Diego Unified School District General Obligation Bonds; Affirms Rating for Parity Debt
23 Aug 2024 | New York
KBRA assigns a short-term rating of K1+ to the San Diego Unified School District (San Diego County, California): 2024 General Obligation Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2018, Series H-1) (Green Bonds) (Federally Taxable); 2024 General Obligation Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2022, Series B-1) (Sustainability Bonds) (Federally Taxable); and, 2024 General Obligation Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2008, Series O-1) (Green Bonds) (Federally Taxable).
KBRA additionally assigns a long-term rating of AAA to the District's: 2024 General Obligation Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2018, Series H-2) (Green Bonds); 2024 General Obligation Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2022, Series B-2) (Sustainability Bonds) (Federally Taxable); 2024 General Obligation Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2022, Series B-3) (Sustainability Bonds); and, 2024 General Obligation Bonds (Dedicated Unlimited Ad Valorem Property Tax Bonds) (Election of 2008, Series O-2) (Green Bonds).
Lastly, KBRA affirms the long-term rating of AAA for the District's outstanding General Obligation Bonds.
The Outlook for the long-term ratings is Stable.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- Per consultation with KBRA external counsel, robust bondholder protections are afforded by California’s constitution and state law.
- Substantial and diverse tax base that continues to grow, with levy dedicated to debt repayment.
- Experienced management team, with demonstrated ability to manage challenges; augmented by significant state and county oversight and monitoring of District budgeting and fiscal reporting.
Credit Challenges
- Declining enrollment trend negatively impacts operating revenues.
- Limited operating revenue flexibility requires strong expenditure control to maintain financial health.
Rating Sensitivities
For Upgrade
- Not applicable at AAA rating level.
For Downgrade
- Significant tax base declines which would necessitate a substantial increase in the tax rate for debt service.
- A reduction in reserve levels below 2% of annual operating expenditures would erode financial flexibility and weaken credit strength.
To access rating and relevant documents, click here.