Cochise County Unified School District No. 27 (Douglas), AZ GO Rating Raised To 'A' On Improved Financial Position

CENTENNIAL (S&P Global Ratings) May 24, 2019--S&P Global Ratings raised its underlying rating (SPUR) to 'A' from 'A-' on Cochise County Unified School District No. 27 (Douglas), Ariz.'s general obligation bonds. The outlook is stable.
"The raised rating reflects our view of the district's improved financial position over the last three years, a product of the district's cost containment efforts and an increase in its primary tax rate," said S&P Global Ratings credit analyst Alyssa Farrell.
The GO rating further reflect our view of the district's:
  • Strong general fund performance in the last three audited fiscal years, improving the available fund balances to very strong levels;
  • Stable, albeit weak, service-based economy, which has recently begun to recover from the Great Recession;
  • Steady enrollment growth, the primary driver of revenue under the state funding formula; and
  • Very low to low debt levels, with rapid amortization and the lack of additional debt plans.
Somewhat offsetting our view of the aforementioned strengths is the district's limited local economy, with low wealth and income indicators.
The stable outlook reflects our opinion of the district's relatively stable local economy, with recent enrollment growth and property value recovery that is expected to continue in the near term. The outlook further reflects our expectation that the district will maintain its very strong financial position over the next two years, supported by anticipated increases in ongoing revenue and conservative expenditure assumptions. We do not expect to change the rating during our two-year outlook horizon.
We could raise the rating if the district's economic indicators improve to a level commensurate with those of higher-rated peers and if management formalizes more of its financial management policies and practices, all else held constant.
We could lower the rating in the next two years should the district's financial performance worsen materially, resulting in a significant reduction in its reserves to a level we no longer consider strong.
The district has about $6 million in direct debt outstanding as of fiscal 2019.
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