Anoka-Hennepin Independent School District 11, MN Debt Outlook Revised To Positive On Strong Performance And Reserves

CHICAGO (S&P Global Ratings) March 18, 2020--S&P Global Ratings revised its outlook to positive from stable on Anoka-Hennepin Independent School District (ISD) No. 11, Minn.'s existing general obligation (GO) debt, certificates of participation (COPs), and other lease-backed debt and affirmed our 'AA-' long-term rating on the GO debt and our 'A+' long-term rating on the COPs and other lease-backed debt. At the same time, we assigned our 'AAA' enhanced long-term rating and 'AA-' underlying rating to the district's series 2020A GO school building bonds. The outlook is positive.
"The positive outlook reflects our view that the district has maintained strong budgetary performance and very strong reserve levels, assisted by a recently increasing enrollment trend and sustained tax base growth, all of which, if persistent, could lead to a higher rating within the next two years," said S&P Global Ratings credit analyst Emily Powers. Anoka-Hennepin ISD No. 11, with a student population of over 35,000, is one of the largest school district in the state of Minnesota, providing education to many of the Twin Cities' outer-rim northern suburbs. Being near one of the largest growing metropolitan areas in the Midwest, its sizable tax base, at over $24 billion, continues to show consistent growth, as existing home values increase and construction on new homes continues. Operationally, the district is strong, with consistently positive operating results and very stable available reserve levels. Its recently increasing enrollment trend has also helped the district financially, with increased state aid revenue coming in as student counts continue to rise. Current developments and additions at many district locations will allow for this trend to continue, creating more capacity. The district's historically strong financial position, as well as its low cost pressure coming from its debt and other fixed costs (pensions and other postemployment benefits) and trend of increasing enrollment, have given it financial flexibility in recent years and, if sustained, could lead to a higher rating within the next two years.
The series 2020A bonds were approved by district voters in a November 2017 referendum and will be the second and final installment of its "Fit for the Future" bond program. The current issuance will fund continuing additions at various high school locations, including fitness updates and a new gym, as well as additions at other district facilities and upgraded media centers. The bonds are secured by the district's unlimited-tax GO pledge. The district's COPs and lease-backed debt are secured by lease payments, subject to annual appropriation, and the rating on these obligations is one notch below the district's GO rating to reflect the risk of non-appropriation.
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