On Monday, Moody’s Investors Service has assigned a Aa2 underlying rating to the El Paso Independent School District, TX’s $201 million Unlimited Tax School Building Bonds, Series 2020.
Moody’s maintains a Aa2 rating on the district’s outstanding general obligation unlimited tax (GOULT) bonds, the Aa2 rating on the general obligation limited tax (GOLT) notes, as well as a Aa3 rating on the district’s outstanding lease revenue bonds.
Via a news release, EPISD officials shared the following information on the rating and the reasons.
The Aa2 rating reflects a large tax base supported by a diverse and growing economy, and consistently healthy financial metrics despite persistent declining enrollment. The rating also reflects resident income indices that are lower than the nation consistent with border credits but incorporates the economic stability stemming from large institutions such as Fort Bliss and the University of Texas at El Paso (University of Texas System rated Aaa stable). Also considered is an above-median debt profile tempered by a below-median pension burden.
The stable outlook reflects our expectation that the tax base will continue to benefit from the diverse economy anchored by stabilizing institutions. The outlook also reflects the expectation that the conservative management team will continue to budget prudently to maintain favorable financial performance, despite challenges associated with decreasing enrollment.
FACTORS THAT COULD LEAD TO AN UPGRADE
- Continued economic development supporting materially higher assessed values
- Trend of financial performance that significantly exceeds peers
FACTORS THAT COULD LEAD TO A DOWNGRADE
- Weakened financial profile
- Economic contraction that materially decreases assessed values
- Continued or increased enrollment loss that leads to structurally imbalanced operating results
- Increasing debt profile absent growth in the tax base
The district’s outstanding GOULT debt, including the Series 2020 bonds, are secured by a direct and continuing annual ad valorem tax, levied on all taxable property in the district without legal limitations as to rate or amount.
USE OF PROCEEDS
Proceeds of the Series 2020 bonds will be used to fund capital improvements at numerous school sites throughout the district.
El Paso ISD encompasses the majority of the City of El Paso, which is the county seat and the 6th largest city in the state. The local economy is largely driven by defense and logistics, with manufacturing, mining, education and health care also contributing to economic growth. Fiscal 2020 enrollment was estimated at 55,683.
The principal methodology used in this rating was U.S.Local Government General Obligation Debt published in September 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.