KBRA Assigns AAA Rating with Stable Outlook to Dallas Independent School District’s Unlimited Tax School Building and Refunding Bonds
26 Nov 2024 | New York
KBRA assigns a long-term rating of AAA with a Stable Outlook to Dallas Independent School District, TX's (“DISD” or the “District”) outstanding Unlimited Tax School Building and Refunding Bonds. The long-term credit rating reflects the District’s strong financial management policies and practices guided by an experienced leadership team, favorable financial operating performance supporting solid reserve and liquidity levels, a mature and diverse economic base that has experienced continued growth, particularly in terms of its property taxing base, and what KBRA considers to be a well-managed and conservative debt profile. These strengths are counterbalanced, in part, by a continued trend of enrollment decline.
The Unlimited Tax Bonds are obligations of the District, 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 Stable Outlook reflects KBRA’s expectation that management will continue to effectively manage the District’s finances while balancing the need to remit recapture revenues to the State, the tax base will continue to grow, and that DISD’s overall net debt profile will remain conservative and well-managed as the District addresses its capital needs though the anticipated issuance of additional debt obligations.
Key Credit Considerations
The rating assignment reflects the following key credit considerations:
Credit Positives
- Strong financial management policies and an experienced, effective management team.
- A diverse and growing economic base with AV in the District’s boundaries having grown at a CAGR of 7.3% from FY 2012 through FY 2024.
- A conservative debt profile, manageable long-term retirement liabilities (pension and OPEB), and moderate overall net debt burden. KBRA expects that the District’s debt burden will remain moderate, even as its capital needs necessitate the issuance of additional authorized debt obligations.
Credit Challenges
- State recapture of the District’s tax revenues reflects 11.6% of the District’s GF expenditures for FY 2023.
- Continued declines in both enrollment and ADA. KBRA understands that DISD has early indications of stabilization in enrollment and is actively attempting to reclaim unenrolled students by modernizing school facilities.
Rating Sensitivities
For Upgrade
- Not applicable at AAA rating level.
For Downgrade
- While not expected, a trend of decline in the ad valorem tax base may negatively impact the rating.
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