Peralta Community College District, CA Bond Rating Outlook Revised To Negative On Operational And Financial Challenges

and affirmed its 'AA-' long-term and underlying (SPUR) rating on Peralta Community College 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 $65 million series 2020E (election of 2006) GO bonds, $50 million series 2020A (election of 2018) GO bonds, and $19.9 million series 2020 GO refunding bonds. Finally, we affirmed our 'AA-' long-term rating and SPUR on the district's other postemployment benefit (OPEB) debt. We calculate the district will have about $692 million in governmental debt at the end of fiscal 2020.
"The negative outlook reflects our view of the district's ongoing operational and financial management challenges, as highlighted by the recent change to probation status for the accreditation of its four colleges," said S&P Global Ratings credit analyst Avani Parikh. While the district has instituted a number of organizational changes, including an overhaul of senior leadership with a new chancellor and several new vice chancellor positions, lack of progress toward addressing underlying concerns and heightened accreditation risks could lead to demand and operational pressure if not resolved. At this time, the rating is supported by the district's robust economic base, and our expectation that the district will maintain near stable operations and strong reserve levels, with unrestricted available fund balances surpassing 10% of operating expenditures based on the district's recently adopted revised policy.
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