Cypress-Fairbanks ISD, TX Series 2019 Refunding Bonds Assigned 'AAA' Rating


DALLAS (S&P Global Ratings) Jan. 4, 2019--S&P Global Ratings assigned its 
'AAA' long-term rating and 'AA' underlying rating for credit program to 
Cypress-Fairbanks Independent School District (ISD), Texas' series 2019 
unlimited-tax refunding bonds. At the same time, S&P Global Ratings affirmed 
its 'AA' underlying rating on the district's existing general obligation debt. 
The outlook on all ratings is stable. 

The 'AAA' long-term rating reflects our view of Cypress-Fairbanks ISD's 
eligibility for, and participation in, the Texas Permanent School Fund (PSF) 
bond guarantee program, which provides the security of a permanent fund of 
assets the district can use to meet debt service on bonds guaranteed by the 
program. 

The district continues to experience steady tax base growth, which has aided 
in building its very strong available general fund balance but also led to 
high overall net debt per capita and moderately high overall net debt versus 
market value. We expect recent trends to continue with the district 
maintaining a reserve position and a debt burden that are both higher than 
those of similarly rated school districts across the nation. The district 
currently has $2.68 billion in total direct debt outstanding.

The 'AA' underlying rating reflects our opinion of the district's general 
creditworthiness, including its:
  • Access to and participation in the broad and diverse Houston metropolitan statistical area (MSA);
  • Healthy property tax base growth in recent years, supporting strong-to-very-strong resident wealth and incomes;
  • Very strong finances and reserves despite growth-related pressures; and
  • Good financial management practices and policies under our Financial Management Assessment (FMA) methodology.
We believe somewhat offsetting these credit strengths are what we consider the 
district's:
  • Moderately high overall net debt as a percent of market value and high overall net debt per capita;
  • Slower-than-average debt amortization; and
  • Elevated annual debt service expenditures, which could increase with future debt issuances to address growth-related capital needs.
"The stable outlook on the long-term rating reflects S&P Global Ratings' view 
of the strength of the Texas PSF guarantee based on the fund's assets and 
performance," said S&P Global Ratings credit analyst Stephen Doyle.

The stable outlook on the underlying rating reflects our view that, despite 
economic challenges following Hurricane Harvey, the district's tax base has 
continued to demonstrate steady growth and that  access to the broad and 
diverse Houston MSA economy has historically provided regional employment 
stability. The rating also reflects our view that the district will likely 
maintain its strong and consistent budgetary performance, which supports its 
very strong available reserves and enhances its flexibility to address its 
growth-related needs or sustain operations if the tax base were to stagnate or 
decrease significantly. At the same time, we expect the district's debt burden 
to remain moderately high-to-high given its growth projections and capital 
needs. The district's good financial management, supported by its sound 
budgeting practices, and comprehensive investment and debt management 
policies, will aid in maintaining credit stability. For these reasons, we do 
not expect to change the rating during the two-year outlook period.

All other factors remaining equal, we could raise the rating if the timing and 
magnitude of the future debt issuances is supported by property tax base 
growth, coupled with enhanced financial management practices and policies as 
assessed under our FMA methodology.

We could lower the rating if financial performance were to weaken, resulting 
in decreased budgetary flexibility and liquidity, or economic indicators were 
to weaken significantly to levels we no longer consider commensurate with 
those of similarly rated peers. We could also lower the rating if additional 
debt issuance were to outpace the rate of tax base growth, resulting in a 
significant increase in the district's high debt profile.
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