S&P: Splendora Independent School District, TX General Obligation Debt Upgraded To 'A+' On Expanding Economy
"We base the upgrade on the district's expanding economy and consistent financial performance, as demonstrated by management's ability to maintain very strong reserves despite growth-driven pressures," said S&P Global Ratings credit analyst Ann Richardson.
The rating reflects our opinion of the ISD's general creditworthiness, including its:Access to Houston's deep and diverse economy;Healthy property tax base and enrollment growth; andVery strong finances. We believe the rating is somewhat constrained by what we consider the district's:High gross debt as a percent of market value, albeit moderately high when accounting for state aid; and Adequate market value per capita. The 2016A bond proceeds will refund a portion of the ISD's debt for interest rate savings. Proceeds from the 2016B bonds will refund some district bonds for interest rate savings and fund various capital projects.
Splendora ISD serves an estimated population of 15,146. It is in Montgomery County, about 35 miles north of Houston. Residents have easy access to the Houston metropolitan statistical area (MSA) via US Highway 59. Given the district's easy access to the Houston MSA, we believe the ISD will continue to experience healthy AV growth. Enrollment has increased a cumulative 9.4% from fiscal years 2012 to 2016, to 3,800 from 3,474. Based on management's growth trends and projections, we believe that enrollment will continue to increase by about 4% in 2017.
The stable outlook on the 'AAA' program rating reflects our view of the Texas Permanent School Fund's strength and liquidity.
The stable outlook on the underlying rating reflects our expectation that we will not raise or lower the rating over the next two years, and that management will maintain a very strong financial position despite facing growing enrollment needs. The outlook on the underlying rating also reflects our view that the ISD has no significant medium-term debt plans, which should allow debt ratios to moderate.
We could lower the rating if the district were to draw down its fund balance below its informal target of three months of operating reserves, or if increasing enrollment pressures result in the need for additional debt and the ISD's debt profile is elevated such that it is no longer comparable with those of other 'A+' rated peers.
If market and income values significantly increased to levels we believe commensurate with higher rated peers, and debt levels were to moderate, we could consider a higher rating.