Klein Independent School District, TX Series 2023 Bonds Rated ‘AA’; Outlook Is Stable
DALLAS (S&P Global Ratings) June 21, 2023--S&P Global Ratings assigned its 'AAA' long-term (program) rating and 'AA' underlying rating to Klein Independent School District (ISD), Texas' anticipated $317.7 million series 2023 unlimited-tax schoolhouse bonds and $41.2 million series 2023A unlimited-tax refunding bonds. At the same, we assigned our 'AA' long-term rating to the district's anticipated $11.2 million series 2023B unlimited-tax refunding bonds. Lastly, we affirmed our 'AA' long-term and underlying rating on the district's general obligation (GO) bonds outstanding. The outlook is stable.
The bonds are payable from a continuing direct annual ad valorem tax levied by the district, without legal limit as to rate or amount, on all taxable property within its borders. Bond proceeds stemming from the 2023 schoolhouse bonds will be used to finance various capital projects authorized by the electorate in the district's 2022 bond election. Proceeds from the series 2023A and 2023B bonds will be used to refinance the 2013A and 2013B obligations respectively, on a current basis to achieve net present value savings.
"The district's credit profile is characterized by its role as an expanding bedroom community, with full access to the broad and diverse Houston metropolitan statistical area economy, providing residents with extensive employment opportunities," said S&P Global Ratings credit analyst Daniel Golliday. Its tax base has demonstrated consistent growth during the past several years, illustrated by year-over-year increases in assessed value, largely attributed to continued residential property development. The strong tax base also affords the district's meaningful flexibility to maintain balanced operating results without major changes to its interest and sinking levy rate.
The district's overall strong financial profile has historically yielded consistent and positive financial performance, enabling it to cash fund various capital-related expenditures with excess revenue while maintaining its sizable reserve position. Further supporting the rating is the district's institutionalized financial management discipline, reinforcing our view that management practices are well-reasoned and sustainable, that provide a meaningful hedge to external and internal budgetary pressures should they materialize. While the district has a large capital footprint, its tax base is strong enough to support its debt burden without compromising overall credit quality. Beyond the near term, we assess the district's credit stability will be contingent on the maintenance of its very strong reserves to sustain operations should legislation adversely affect the state school-funding environment. However, we expect Klein ISD's fiscal position over the near term will remain at least strong and in line with what we typically see among similarly rated peers.
For more information on Texas School Districts, see "U.S. Local Governments Credit Brief: Texas School Districts Means And Medians" (published April 4, 2023, on RatingsDirect).
The outlook on the underlying rating reflects our view that the district's experienced management team will maintain its strong financial position should future legislation adversely affect the state-funding landscape. . The outlook further reflects our expectation that sustained economic growth and tax base expansion will continue to benefit the district, enabling the district to continue to implement its approved bond program, with limited impact to our view of the district's debt profile. We do not expect to change the rating within our two-year outlook horizon.
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.
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| Primary Credit Analyst: | Daniel Golliday, Dallas 214-505-7552; daniel.golliday@spglobal.com |
| Secondary Contact: | Cenisa C Gutierrez, San Francisco (510) 206-8913; cenisa.gutierrez@spglobal.com |
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