S&P: Woodland Hills School District, PA GO Debt Rating Outlook Revised To Stable From Negative On Improved Finances

S&P Global Ratings revised the outlook on its 'A' long-term rating and underlying rating (SPUR) on Woodland Hills School District, Pa.'s general obligation (GO) debt to stable from negative.

At the same time, S&P Global Ratings assigned its 'A' long-term rating and stable outlook to the district's series 2018 GO bonds and affirmed its 'A' long-term rating and SPUR on the district's existing GO debt.

The outlook revision reflects S&P Global Ratings' opinion of the district's posting two consecutive general fund surpluses, increasing available reserves to, what the rating service considers, a strong 13.1% of expenditures.

"We do not expect to change the rating over the outlook's two-year period. However, we note rising expenditure costs could pressure the rating beyond our outlook period if management does not enact specific plans to prevent further deficits beyond the next two fiscal years," said S&P Global Ratings credit analyst Michael Mooney. "If rising operating or fixed costs were to result in budgetary performance weakening, causing available reserves to decline to levels we no longer consider on par with similarly rated peers, with no plans to correct them, we could lower the rating. We, however, could raise the rating if available reserves were to increase, with management sustaining them at higher levels, coupled with economic indicators improving."

The stable outlook reflects S&P Global Ratings' opinion of the district's stabilizing financial metrics, which have resulted in strong available reserves. The rating service believes the district's manageable debt provides further rating stability.

The district's full-faith-and-credit-GO pledge secures the bonds. The Act 1 Index under Pennsylvania commonwealth statute restricts a district's ability to raise the tax levy higher than a certain index, which the Pennsylvania Department of Education determines. S&P Global Ratings rates the district's limited-tax GO debt at the same level as its view of the district's general creditworthiness, reflected in the unlimited-tax GO bond rating.

S&P Global Ratings understands officials intend to use series 2018 bond proceeds to fund various capital projects districtwide, mainly to renovate district buildings, and capitalize interest on a portion of the bonds.

The rating service recognizes this is the second issuance from a total board-approved $85 million authorization; the district expects to issue various amounts in fiscal years 2018 and 2019.

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