S&P: Poway Unified School District Public Financing Authority, CA Series 2017A Special Tax Refunding Bonds Raised To 'A-'

S&P Global Ratings has raised its long-term rating and underlying rating (SPUR) to 'A-' from 'BBB+' on Poway Unified School District Public Financing Authority, Calif.'s series 2017A special tax refunding bonds. The outlook is stable.

"The rating action reflects our view of the authority's continued low delinquency rates and very diverse tax base, in addition to its fully built out status with all residential parcels and strong assessed value growth," said S&P Global Ratings credit analyst Brian Phuvan.

The 2017A bonds are issued in accordance with the Marks-Roos Local Bonds Pooling Act and are secured by local obligations paid from net special tax revenues levied on Community Facilities District No. 6 Improvement Area (IA)-A, No. 10 IA-A, and No. 10 IA-B. Each underlying improvement area is responsible for its own local obligation, and special taxes levied in one cannot be used to pay the debt service in any other. However, a combined reserve held at the authority level will provide cross-collateralization. Therefore, our analysis primarily reflects the collective credit quality of the three improvement areas. The combined reserve, in the form of a surety policy, will be the lowest of maximum annual debt service, average annual debt service, and 10% of the issue price of the bonds.

The stable outlook reflects our expectation that the IAs' fully developed status will continue to produce adequate coverage by owner-occupied properties. We believe the very diverse property tax base mitigates the reliance on a small amount of owners to provide special taxes, and partial cross-collateralization as the authority's reserve provides additional benefits. We do not anticipate changing the rating during the two-year outlook time frame.

We could raise the rating if the authority's assessed value increases or the debt burden falls, resulting in overall value-to-lien (VTL) ratios and effective tax rates that are more in line with those of higher-rated peers.

We could lower the rating if the authority's delinquencies rise, or it issues overlapping debt that significantly lowers overall VTL levels.
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