Loma Prieta Joint Union Elementary School District, CA GO Rating Raised To 'AA' On Stronger Finances

CENTENNIAL (S&P Global Ratings) Jan. 10, 2019--S&P Global Ratings raised its 
long-term rating to 'AA' from 'AA-' on Loma Prieta Joint Union Elementary 
School District, Calif.'s existing general obligation (GO) bonds. At the same 
time, S&P Global Ratings assigned its 'AA' long-term rating to the district's 
series A election of 2018 general obligation bonds. The outlook is stable. 

"The raised rating reflects our view of the district's strengthened financial 
position, with increased reserves to 27% in fiscal 2017 from 7.1% in 2011," 
said S&P Global Ratings credit analyst Angel Bacio. "Despite an intentional 
use of reserves in fiscal 2018, the district's operational performance has 
remained consistently positive overall in recent years, and fund balances will 
likely continue to remain at very strong levels, enhanced by what we consider 
good financial management policies and practices."

The district is located in Los Gatos, an affluent area just 10 miles south of 
San Jose, and the tax base has experienced sustained assessed value growth 
historically, which is a primary revenue driver for the district given its 
basic aid status. We view this as a credit positive, as the district is less 
reliant on state funding sources and is insulated from state budget 
fluctuations. The district further benefits from strong voter support, with 
two voter-approved parcel taxes generating a combined $600,000 annually for 
general fund purposes. We believe these strengths will remain stable 
throughout the foreseeable future.

The GO bonds are secured by revenue from unlimited-ad valorem taxes levied on 
taxable property within the district. The Boards of Supervisors of Santa Clara 
and Santa Cruz Counties has the power and obligation to levy these taxes at 
the district's request to repay the bonds. The county is required to deposit 
such taxes, when collected, into the bonds' debt service fund. The $3.6 
million series A GO bond proceeds will be used to finance construction and 
improvements to existing school facilities. After the issuance of the series A 
bonds, the district will have a total direct debt of roughly $9.1 million.

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