KBRA Assigns AA- Rating With Stable Outlook to Canutillo Independent School District, Texas, Unlimited School Building Bonds, Series 2025

KBRA assigns a long-term rating of AA- with a Stable Outlook to the Canutillo Independent School District, Texas, Unlimited Tax School Building Bonds, Series 2025.

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.
• Experienced 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.
• Stable revenue trend with 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 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.

To access ratings and relevant documents, click here.

Methodologies

• Public Finance: U.S. Local Government General Obligation Rating Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1009728

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